Robert Reich

Economics in Two Minutes

In two minutes 15 seconds a Rhodes scholar, renowned economist and former Labor Secretary explains the structural economic problem of the USA – LINK

The video does a much better jobs than the points listed below.

• Since 1980 our economy has almost double in size, but (adjusted for inflation) salaries have barely increased. Where did the money go?

• To the super rich (top 1%) who used to take home 10% of the wealth & now take home 20%. It’s given them a total of 40% of today’s total wealth in the USA.

• With the wealth they buy political power. In 1980 their tax rate used to be 70% and now its 35%, and a major major portion of that wealth is taxed at 15% – the tax on capital gains. The wealthiest 400 only pay a 17% tax

• This created a huge budget deficit. Schools, roads, and many safty nets that protected the middle class have and will be further cut

• America’s middle class no longer able to survive on the scraps left by the wealth  turns on each other. The flames of hate are even fueled by the wealthy. – Union against non union, native born against immigrant,  one race against another, one religion against another, public employee against private.

• The middle class no longer able to borrow as before  and diminished in assets = an anemic recovery. The only way we can have a strong economy is to have a strong middle class.

We all want government to be more efficient, but its long past time for the USA to start building its middle class like Brazil, China and so many other countries are doing.

Thanks to several of you who sent me this video and Paul for posting it in the comments section.

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KISS & Stocks

(Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

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Index	Percentage	Volume
Dow	+0.36%	Up
NASDQ	-0.28%	Up
S&P 500	+0.30%	Up
Russell 2000	+o.03%	-

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Technicals, Fundamentals & Analysis

• The Silver Lining - If some sort solution to the Greek crisis occurs, all those put buyers will get caught with their pants down and we will have one hell of a rally. Usually this number of puts indicates a market reversal. However fundamentals over Greek debt rule.

• The McClellan Oscillator (MO) chart rose to -31.20 ( below -30 = somewhat oversold, below -60 = oversold, below -90 OMG oversold) The lower the MO goes the more the chances for some sort of rebound. Stocks are now moderately oversold.

• $USD The Dollar fell a significant -o.79% Friday. ( +/- 0.50 is a significant move) There have been many major moves in the dollar as the Greek crisis builds. Although we had a big fall Friday, the last 7 weeks are clearly bullish.  This is money coming out of the Euro (because of Greece and into dollar) and moving into the dollar. For stocks trend = Bearish

• Reading The Tea Leaves – The training wheels come off the US economy June 30th as QE #2 ends. Greece’s debt crisis overshadows Irelands (just as bad) and Portugal, Spain and Italy follow. All this is exacerbated by unregulated derivatives that the US introduced to the world’s banking system. It’s impossible to to call exactly when Greece defaults (some say it may not default) and how the panic will spread.  However there is great downside risk.

• Reading The Tea Leaves - Longer Term (repeat) -  ”See May 20th blog for forecast for this summer.“

Our bull market has survived a a catastrophic nuclear disaster, bank foreclosures, unemployment, shadow capitalism, revolutions and a whole lot more as the Fed had our backs with liquidity. Now that liquidity (QE #2) is over in two weeks and if Greece collapses Investors predicts – the bull will die.

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When Bears Rule

Right now, instead of  joining the Chicken Little’s running around with their heads chopped off many sophisticated investors are protecting their assets

We’ve learned from experience everything from cash to housing values can go down in value. There seems to be NO financial armageddon looming, but their are ways to buy insurance or hedge against bears ruling. Investors has recommended several and they are listed in the POSITIONS Section of the blog and below

If the markets go down you can make money by using ETF’s (market baskets of stocks) that short the market (they go up as stocks go down). Here’s a list of some from the least risky to the most.

• SH (Short the S&P 500)
• SDS (2x short S&P 500)
• TZA (3x short small cap stocks)
• More sophisticated investors can place calls on these three ETF’s or puts on long ETF’s, or use puts,spreads etc.

By no means is Investors411 recommending that anyone go all in any of the above positions. But they can help if bears rule. You can also follow Investors411 hypothetical portfolio below. Since Investors made its May 20th negative call on the US stocks the benchmark S&P 500 has gone down from @1340 to 1270 or lost about 5%.

• SH gained @+5%
• SDS gained @+10%
• TZA gained @+17%

Simply put stocks go down and you make $. Investors has outlined some of the risks since 5/20 (today – see Silver Lining and Greek debt above for updated risk assessment)

Obviously some strategies can get complicated and difficult. You have to choose just how much  you want to risk. Do you want want to hedge/insure against a small portion of your assets,  go all in or something in between.

Bottom Line - Using an ETF that shorts the market is no different/riskier than using one that goes long. The skill/luck is choosing the right direction and evaluating how much to risk.

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Positions

Below – Investors411  hypothetical portfolio that should outperform the S&P 500.

NLY - Annaly Capital Mgt. Ultra high dividend stock. Bought about a month ago.

TZA - ETF that is 3 times short small cap stocks Bought 1/2 TZA position at 39.75 about  10 days ago. Have already cashed in a 6% gain in TZA.  Hope to buy more today in rally.

Repeat Strategy remains

• Short any rally - Investors411 will use TZA (3X short small cap stocks) and SDS (2x short S&P 500 more conservative) .
• Sell long positions into any rally -

Disclosure - I own NLY, & TZA as well as a group of dividend stocks – I buy all stocks mentioned in the hypothetical Investors411 portfolio.

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Look for an enlightened Paul’s Corner every Tuesday & Thursday and the always informative comments section every day.

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The Fed has moved from an expanding money supply to a neutral – No QE #3. Congress is threatening to contract the money supply. “We [the USA] need to grow at this point more than anything else.” Investors411 outlook will remain negative on the USA unless the Fed and/or congress return to more pro growth policies and/or Euro defaults are solved.

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Longer Term Outlook

Neutral/CAUTIOUSLY BEARISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

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Bulls & Bears

The case for a rising or falling stock (not economics) market

The Bears

• At best unemployment in the USA has stabilized around 9.5%. The stimulus that has caused the reversal will soon run out and employment will grow.
• Housing prices have at best stabilized. 90+% of mortgages are now in some way backed by the US government  (Fannie & Freddie)
• Not only is the middle class in the USA shrinking, most people are saving more than they used to. Money flows are therefore diminishing.
• The European bank stress test was at a best a PR exercise. US banks are not loaning like they used to. They’d rather make more profit in other areas and are still in after shock from the original crisis.
• European Union with the world’s largest GDP, has many shattered economies (PIIGS &  Eastern Europe) and the others are no better off than the USA.
• The US has an exploding military budget $1,003,000,000,000 ($1.03 trillion) last year. If you count all our military expenditures it is over 60% of the world’s military budget.
• Iraq ‘s March elections created a stalemate with no government. The two leading candidates lavishing praising Hezbollah’s founding ayatollah and meeting/praising  Sadr (anti American ayatollah in self imposed exile in Iran) to beg he joins their side in new government.
• Afghanistan – WikiLeaks has just released 90,000 documents showing “devastating portrait of the failing war.”
• China, the leading emerging market has a housing bubble.
• Stocks are overbought according to the MO (see below)

The Bulls

• The dollar is falling and close to breaking out of chart pattern to downside. Lower dollar = higher US stocks because US goods will cost less overseas.
• Oil prices near breakout to new 3 month highs. Higher oil shows greater consumption = bullish, but not if you’re a consumer.
• Shipping prices have rebounded and are moving higher. See BDI below.
• According to International Energy Agency China surpassed the USA in energy consumption in 2009.
• Most US companies that reported better than expected profits cited emerging markets (China specifically) as where they were growing the fastest and creating jobs.
• China will spend $738 billion over the next decade on clean energy. = growth. The USA can’t get a weak climate or energy bill passed congress.
• Unless you want to invest in some European bonds (example Greece) there is almost nowhere to go besides stocks to get more than a couple % growth for your $.
• Black Box/High Frequency Traders dominate the market and they are ONLY concerned about short term results. They can go long or short.
• Weak banking reform means shadow banks can again get over leveraged.= more profits=higher stock prices till another crash.

I’m sure I missed some. To see the positions Investor’s411 is taking see Positions below and also click on POSITIONS at top of blog.

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage	Volume
Dow	+0.99%	down
NASDQ	+1.05%	up
S&P 500	+0.82%	down
Russell 2000	+2.39%	-

Technicals, Fundamentals & Analysis

Investors411 record – 5 years of beating benchmark S&P 500

Mantra -The Black Box/High Frequency Traders control the vast majority of trades.

The NASDQ volume was slightly above average, but the other major indexes had a typical light volume rally that has become the norm for the Black Box traders that control the markets.

News on the earnings week ahead

Significant Indexes-

• McClellan Oscillator (MO) rose dramatically to +79.48 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. 79.25 = BEARISH
• US Dollar –  The dollar  fell  -0.16% yesterday [Anything over +/- @0.50 is significant.] The dollar/stocks relationship is strong – Dollar up = stocks down and visa versa. The Black Box traders, have used the inverse relationship of the dollar as a key part of their trading system. At bottom of trading range. = Neutral/Bullish
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also, good proxy of China.) BDI was in free fall from a high of @4200 to 1700 . This was a huge -60% drop in 8 weeks is very bearish Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI has staged a 6 day +7% rally and is at 1826 = bullish

Reading Tea Leaves-

The McClellan Oscillator at +79.46 shows stocks as being overbought. I’d be just a little more cautious about using short ETF’s too early because of the strong bullsh sentiment right now among Black Box traders. But, its clearly time to think about using those ETF’s that short major indexes. Click on POSITION at top of blog for more info.

The MO has not been above 80 since the big spring rally in April of 2009 – then it reached @ 105. In early Jan. of 2009 it did reach 120.

Positions

The  Positions Section link to latest & former buys and sells  - These are positions I actually own

Updated over weekends Investors411 holds ONE position in SDS at this time

Strategy – From Thursday - The same as before - If/as US major indexes become more overbought the more ETF’s that sort the market will be purchased. Starting out with SH. Then the higher above 60 the MO goes, the more SDS (200% short the S&P 500) and other even 300% short ETF’s will be used the higher the MO goes.  See POSITIONS section at top of blog for more. Therefore what is happening is a series of trades (Short ETF’s) the more overbought the market becomes.

The same entry/exit strategy applies. Considering dropping exit/entry point to 4 instead of 5%. See Friday’s Investors411 for more. The following trades were made Friday.

• SH (ETF that shorts the S&P 500) was sold for 51.26 – a -2% loss. The other 1/2 of SH was sold earlier for a 3% gain
• SDS (ETF the shorts the S&P 500 at 200%) was bought at 32.50 Nibbled with just a 2% of portfolio position.

Reasoning - The majority of technical analysts seem to be bullish, the BDI has reversed its 8 week fall & the dollar is right at its major support level.Therefore they may be room for 3 week bull rally may continue. We could reach a high above 100 on the MO. However the MO chart has not gone over +80 (where it is now) since April of 2009. Translation – There is some greater risk in this trade than if we had long term bearish outlook. However the more overbought thing get the safer the trade.

Longer term investors may want to wait to see of the MO goes up another 20 points before nibbling. Please recognize that right now this looks like it may only be  a trade  and NOT a long term investment

EWZ (Brazil) an ETF Investors411 owned for years is again outperforming and is a buy the dip opportunity.

GLD – (Gold) has come down off its high and any further dip Investors411 will buy.

The Long Term Outlook has been changed to NEUTRAL from Cautiously Bearish As explained/predicted Friday, the benchmark S&P 500 broke through the first of 4 different resistance levels. Another 3% move higher and the remaining 3 levels will fall.

Long Term Outlook – NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Photos of Ron Paul & Barney Frank from Wikipedia

Kissing Cousins?

SE writing in the comments section has a revelation and points out  similarities between Libertarian Ron Paul & Barney Frank. He concludes “We need to change our foreign policies and redirect the savings to our domestic policies.” Source – A Paul/Frank joint interview on public radio

Ron Paul is perhaps even more aggressive about getting out of Afghanistan, Iraq and closing our costly European bases than Barney Frank. Paul’s position is often echoed in the comments section by Mama Jama who believes we should bring everyone home and protect the USA (also Israel).

Jsovjani has always wanted Europe to pay more in the defense of Europe & the world, but realizes that’s not going to happen. (see comments section) In the far right’s eyes Europe’s major threat is (“old communist”) Russia. But the Russians would rather get rich selling the Europeans their natural resources than fighting them.

The problem with most libertarians is they want not only to eliminate almost all military spending they also want to eliminate almost all social security, medicare and supervision of capitalism,  etc.  They’d let the shadow banks run wild.

Black Box Algorithms

I know this is boring, but its YOUR money.

One major change from black box traders is basically all stocks are moving together in concert. CNBC had an analyst/chartist on at noon EST who demonstrated that for decades US stocks have not moved in concert like they are now.  They all go up together and down together.

This is directly due to Black Boxes that buy and sell (they also use puts and calls) sector and Index ETF’s. They also concentrate on mostly liquid stocks. They make up 50% to 80% of trades in a given day – so with their High Frequency Trades everything moves in concert. (more later)

This is one major reason Investors411 is using ETF’s right now.

This does NOT negate our stock list or selecting best stocks out there – something Paul R and and a few others do quite well. In fact, picking the best stocks in oversold conditions may be even more relevant.

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage	Volume
Dow	+0.04%	flat
NASDQ	+0.35%	down
S&P 500	-0.02%	down
Russell 2000	-0.41%	-

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Mantra for week Earnings Season begins this week. - How markets react to news has usually been the key. If a stock shrugs and goes nowhere on good earnings news you know there’s trouble ahead. Remember Black Box algorithms  dominate even more as volume declines.

The Intel earnings home run went from a +8% move in pre market trading and ended the day up +1.67% = Bearish

Black Box traders rallied into the close = Bullish

Markets went no where in weak volume. If they do this again its bearish. Now = Neutral

Largest market news event - China economy slowed as expected in the second quarter. It’s hard to trust any government’s economic proclamation – especially China. Numbers are usually massaged in favor of who is in power. Translation – China is growing, just not as fast as they say. This fact is generally accepted by most investors/traders so its not news.

Significant Indexes-

• McClellan Oscillator (MO) fell to +51.57 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. The Black Boxes have not allowed the MO to rise above 80 since 3/09. Now close to overbought position = mildly bearish
• US Dollar –  The dollar fell -0.26% yesterday [Anything over +/- @0.50 is significant.] The dollar is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, have used the inverse relationship of the dollar as a key part of their trading system. This inverse relationship is part of their algorithmic system. For stocks = Bullish
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China.) BDI is in free fall from a high of @4200 to 1710 Monday. This is a huge -59% drop in almost 8 weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI fell a decreased -4.53% yesterday. You have to go back to April of 2009 to find a lower BDI. Fundamentally this is very BEARISH

Best read of tea leaves is Black Boxes push markets slightly higher. Reasons – dollar probably continues to fall  & momentum higher at close yesterday.

Positions

The  Positions Section link to latest & former buys and sells  - These are positions I actually own

Updated over weekends Investors411 holds ONE position at this time

The overall stagey at this time especially for traders (as opposed to longer term investors) is to buy ETF’s that short the market. As the MO shows the market is more overbought add to those positions using ETF’s that short more and make bigger purchases.

• Yesterday Investors411 bought SH – The ETF that shorts the S&P 500. @% of portfolio position at 51.45
• US markets did not rally enough (get overbought enough) to use the EFT’s that double or triple short the indexes and even buying the SH might be premature
• If when indexes move higher I will add these ETF’s (see yesterday’s investors411)
• Will keep a 5% stop loss on each position.
• It depends a lot on how high the MO goes, but for the next couple days a rally of the benchmark S&P 500 above 1105 will probably be the next buy area.

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Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Sometimes what life is about is wanting More Cowbell

Thanks to HG for the clip. You can see a longer than 44 second version at the above link from SNL.

The Black Boxes

Investors411 has been beating the drums over the control Black Box Entities have over your money.

The Will Ferrell link was short, simple  and funny. This link is long, technical and boring.

But if you are at all invested in stocks or concerned about market regulations  you should skim/read this piece about the High Frequency Trading that black box entities use from Zero Hedge by Tyler Durden

Black box traders have rewritten the whole concept of investing. Money quotes -

• “can clearly demonstrate that HFT is having an increasingly large impact on the microstructure of equity trading dynamics.
• Values which were once only present on the orders of several hours or days are now commonplace in the timescale of  seconds or minutes.”

Bottom Line – Competing with the Black Boxes is impossible for the ordinary trader/investor. They win. However, because they are so big they leave tracks. The problem is before the whales (big investment entities) used to move slow and the black boxes move fast. When markets crash again there will be a HUGE investigation into this kind of trading. There should be now.

I’ve tried to see some patterns that the folks who control these black boxes use. Examples – the dollar & the MO seem to have a high correlation with the majority of their algorithms. But not yet sure that these forecasting tool will work as well as in the past. Even Black Box Traders can’t ignor long term fundamentals forever.

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage	Volume
Dow	+1.44%	up
NASDQ	+1.99%	up
S&P 500	+1.54%	up
Russell 2000	+3.14%	-

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Mantra for week (revised a little) Earnings Season begins this week. - How markets react to news has usually been the key. If a stock shrugs and goes nowhere on good earnings news you know there’s trouble ahead. Remember Black Box algorithms  dominate even more as volume declines.

Caution Black box traders that make up 50% (high volume days) to 80% (low volume days) of all trades seem to follow their own market technicals, and often eliminated volume as a major factor in price moves for indexes & sectors.

Volume rose on the AA earnings news, but was sill below average. This shows a few more traders/investors did buy. = Bullish

Intel computer like last quarter had an outstanding earnings report. Shares of the mother of all chip stocks were up +8% in pre market trading. = Bullish

Fundamentally it comes down to who do you believe – Intel says the worldwide recession is over especially in China and emerging markets and the BDI says we are falling into a double dip or extended recession especially in China and emerging markets. = ??????

Significant Indexes-

• McClellan Oscillator (MO) rose dramatically to +65.41[+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. The Black Boxes have not allowed the MO to rise above 80 since 3/09 = Bearish
• US Dollar –  The dollar fell -0.67% yesterday [Anything over +/- @0.50 is significant.] The dollar is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, have used the inverse relationship of the dollar as a key part of their trading system. This inverse relationship is part of their algorithmic system. For stocks = Bullish
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China.) BDI is in free fall from a high of @4200 to 1790 Monday. This is a huge -57% drop in 7+ weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI fell a decreased -2.72% yesterday. You have to go back to April of 2009 to find a lower BDI. Fundamentally this is very BEARISH

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own - Updated over weekends – Investors411 holds NO position at this time. (see below)

I will be nibbling on an ETF(s) that Shorts the market today on a rally in stocks.

Hope to buy as S&P 500 rallies to resistance levels 1105, better 1112 or best @ 1125 (June high) S&P closed at 1095.  Probably use SDS. (-200% what the S&P 500 does) I will be adding ETF that short 300% when/if the market moves higher.  See yesterday’s Investors411 for options.

Logic – Intel & BDI are presenting two different fundamental pictures of world growth. You could write volumes on all the fundamental factors. The bottom line is that Black Boxes that have taken control over US markets. They have sold when the the MO got up to 80 four times this year. That’s a pretty strong resistance level.

Perhaps zillions of fresh investors will now come off the sidelines and take control. Some will, but my read the tea leaves is any rally will get sold into.

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Not Fit for Democracy

It seems that our brains are hardwired against democracy. “It’s one of the great assumptions underlying modern democracy that an informed citizenry is preferable to an uninformed one” A truly fascinating article in the Boston Globe about how the mind works by Joe Keohane concludes-

When misinformed people, particularly political partisans, were exposed to corrected facts in news stories, they rarely changed their minds. In fact, they often became even more strongly set in their beliefs

This is why appeals to emotionalism, hatred and fear  in politics and with media sources that the moneyed class own works so well. Rush Limbaugh, Glenn Beck, Fox news, the Tea Party Patriots, Sarah Palin etc. all embrace this emotional bias and hatred. They keep pounding on it day after day. 20 years ago news casts used to report and analyze facts. Times have certainly changed. (See Popeye in comment section of blog)

Now It Gets Interesting

It seems that shadow bank lobbyist were able to to gut or seriously water down the Volker Rule, The Lincoln Derivative amendment and almost all of meaningful bank reform, but they forgot or overlooked the Kanjorski Amendment. I never heard of this amendment before either, but Simon Johnson has – “In essence, Kanjorski proposed that a group of 10 federal regulators be given the explicit power to break up big financial firms when they pose systemic risk.”

Now the fun begins –  two Republicans have said they would vote for the bill two democrats against – Senator Feingold (D) does not think it does enough.  The bill does contain a consumer protection agency. Imagine that – something to protect you and me the consumer. More

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage	Volume
Dow	+0.19%	flat
NASDQ	+0.18%	up
S&P 500	+0.07%	flat
Russell 2000	-1.24%	-

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Mantra for week Earnings Season begins this week. – How markets react to news Will be key. If a stock shrugs and goes nowhere on good earnings news you know theirs trouble ahead. Remember Black Box algorithms  dominate even more as volume declines.

Pathetic volume  & flat market. = Neutral

Alcoa (AA) reported last night and slightly beat expectations – How the market reacts to this news is VERY important. Are slightly better than expected earnings built into stock prices? Will find out today with AA. Futures trding up = Bullish

A downgrade of Portugal’s debt did not hurt stocks yesterday – Bad news not hurting stocks shows that it is already built into market prices or expected by investors. = Bullish

The MO (see below) fell 20+ points yesterday. This gives bulls between 30 and 50 points to move higher on the MO before encountering resistance at +60 to +80. Translation another 2 to 4% move higher in the benchmark S&P 500 s possible before resistance is encountered.

Significant Indexes-

• McClellan Oscillator (MO) fell to +32.57[+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. This index is just a wee bit overbought  = Neutral
• US Dollar –  The dollar rose +0.31% Friday [Anything over +/- @0.50 is significant.] The dollar is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, that make up to 80% of all trades, have used the inverse relationship of the dollar as a key part of their trading system. The big move was breaking the support level two Friday’s ago which set up the rally for stocks. The swings in prices are smaller, but growing and therefore right now = Less Relevant
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China) BDI is in free fall from a high of @4200 to  1840 Monday. This is a huge -56% drop in 7 weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI fell a decreased -3.26% yesterday. Rate of decline increased yesterday. = BEARISH

The dip in the MO & the good reaction to bad news (Portugal) means that the bulls are back for another run higher.

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own - Updated over weekends – Investors411 holds NO position at this time. (see below)

Unfortunately, for us, the MO fell 20+ points. Bringing it down from almost overbought territory. The more overbought the better time to invest in one of the short ETF’s. Right now our best opportunity is to go short in an overbought market – However conditions are not yet appropriate

We missed a chance to go long when the MO went below -50 and  I hope we did NOT miss a chance to go short when the MO was above +50.  The area around +/- 60 has been our go long/go short point. Obviously this line is NOT written in stone. – Only time will tell – But be patient - There will be lots of opportunities to go long and short this year

Here’s a list of some Proshare and Direxion ETF’s that short sectors/indexes. You can find a much more complete list clicking here and scrolling down until you find each funds name and LINKS.

• SDS - @200% short the S&P 500
• QID – @ 200% short the NASDQ (basically tech stocks)
• SH – Short S &P 500
• FAZ – @300% short financials
• TYP – @300% short  technology
• EPV – @200% short Europe

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Fatwa Against Vuvuzela

Anyone who watched the World Cup in South Africa over the last few weeks knows what a Vuvuzela is. Perhaps we are all Muslims now. The UAE issued fatwa # 11625 against vuvuzela’s whose beehive sound is too noisy at soccer matches.

Congratulations to Spain for their 1-0 victory over Holland.

YOUR comments

I received an email that contained the following statement over the weekend - “After clearly demonstrating Friday how Bush’s tax cut did nothing in raising net tax revenue next to Clinton. After factoring in inflation and population growth Bush has lost us revenue by 2009. Then you make a the completely contradictory statement ‘There are cases where cutting taxes can raise tax revenue.’ Why? “

Because its true and a well recognized fact by most economists. – However there is a balance between lots of different factors and  obviously you can’t collect no taxes and expect revenues. Maybe it will help to think the Obama Tax cut in 2009 It gets no press because a Republican did NOT make it. This works especially for almost every middle class American. Here’s how it can in the long term raise taxes.

• You cut the taxes of a working American (Say under $100,000) That person goes right out and spends the money especially those well below the arbitrary $100,000 a year figure. They buy something and this generates money and t from sales taxes to income taxes. It bounces some folks up to higher tax brackets because their busisnesses grow. They spend more. Bottom Line – money flows faster and this generates tax revenue.
• It also used to generate jobs. Lower taxes would create more demand and jobs would grow creating more taxpayers. However globalization has virtually killed that. If corporate taxes or payroll taxes decline a bit it does almost nothing to create jobs in the USA. These jobs go to China or another faster growing emerging market country where you can get the job done at 1/4 the price.

Right now the S&P 500 companies are sitting on a mountain of cash $1,800,000,000,000 If they wanted to they could generate millions of jobs in the USA They are simply far more interested in spending this money where it will make them more money and that’s in emerging markets.

The New BRIC’s

The term BRICK’s has been used for years to denote the faster growing big emerging market economies = Brazil, Russia, India, China and sometimes South Korea.

Now a new acronym for mid level countries leading the globalization GDP growth – CIVETS - Columbia, Indonesia, Vietnam, Egypt, Turkey, & South Africa. LINK

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage	Volume
Dow	+0.58%	down
NASDQ	+0.97%	down
S&P 500	+0.72%	down
Russell 2000	+1.48%	-

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Mantra for week Earnings Season begins this week. – How markets react to news Will be key. If a stock shrugs and goes nowhere on good earnings news you know theirs trouble ahead. Remember Black Box algorithms  dominate even more as volume declines.

We had another rally (mostly in post 2:00 EST trading) in decreased volume. 40% below average. These Black Box rallies can go on for a while in low volume  Mom & Pop investors have long since left the market.

While its difficult to understand collectively what the black boxes will do, we do have two signs indicating a reversal should be ahead.

• The BDI (see below)
• The MO is near overbought levels.

Here’s the bulls case for good earnings For stocks –  Bad economics can be balanced out by good earnings

Significant Indexes-

• McClellan Oscillator (MO) rose a to +53.14 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. This index is on the boarder of being overbought = almost Bearish
• US Dollar –  The dollar rose +0.14% Friday [Anything over +/- @0.50 is significant.] The dollar is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, that make up to 80% of all trades, have used the inverse relationship of the dollar as a key part of their trading system. The big move was breaking the support level two Friday’s ago which set up the rally for stocks. The swings in prices are smaller and therefore right now = Less Relevant
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China) BDI is in free fall from a high of @4200 to  1902 Friday. This is a huge -55% drop in 7 weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI fell a decreased -1.92%Friday. Rate of decline is slowing – perhaps a good sign. but overall still = BEARISH

Monday’s Fearless Forecast - Even the black boxes have not been able to push the MO over +80 for over a year. The economic news from employment in the USA to world trade & China (BDI) is not good. We seem to be running into an economic wall that even the Black Box traders will have difficulty penetrating.

The earnings surprise would have to be HUGE to penetrate over +80 on the BDI. So I’m shorting any significant rally and expecting a down week. Were still in wait and see mode. See Positions

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own - Updated over weekends – Investors411 holds NO position at this time. (see below)

Short Term Traders - Those of you who love risk could nibble on the Direxion funds that short markets 300% (see POSITION Section at very top of blog) Some ProShares also do 300%.  I’m waiting till the +53.14 on the MO turns into over +60.

Caution – last time I waited for -54 to become -60 and missed last weeks rally.

Monitor didn’t – see comments section of blog. Also check out the in depth technical analysis of the BDI and other indexes that The Critic sent in

Investors – Sill waiting for the market to reach overbought levels (Close to +60 on the MO) but no cigar yet. The further ovesold the better. See list of ProShare that short market 200% in POSITION Section of blog. You can start to nibble when/if we get over +60 on the MO. The higher the better. Remember this may be only a trade that lasts a week.

The probability of making $ on a short (ETF that shorts an index of sector) is getting better.

Lets say there’s a 200 point rally in the Dow today – you can bet the MO will be  close to +8o or above.

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING