Investors 411 Blog

by Barr Jozwicki
March 30, 2009

Market Updates – What’s Wrong with America?

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , ,

Government rejects GM/Chrysler bailout plan. The G 20 meets. Asking the wrong questions – What’s wrong with our prisons/justice system? The real question - What’s wrong with the USA? The “Quiet Coup’s”  ominous forecast referenced in Sunday’s blog deserves further consideration. One solution that prevented/delayed the downfall of the Roman Empire.

 

Rejecting Autos & G 20

(see  fundamental section below)

What’s Wrong with the USA?

Parade (the Sunday news magazine/supplement in many newspapers) headlined What’s Wrong with Our Prisons? Investors411 asked what’s wrong with our Justice System Friday?

Yes our justice system is a “national disgrace” (Sen. Jim Webb)   Our rate of imprisonment is “5 times the world’s average… Either we are the most evil people on the earth or we are doing something very wrong.”  (headline from front page of  Parade) The real question is what wrong or what’s happened to America’s culture? Webb has some good ideas, but the roots of this problem go well beyond the justice system. 

  • Why are we so violent, 
  • Why are we so fearful?
  • Why are we so focused on me instead of we?  
  • Why do we focus on retaliation instead of mediation?
  • Why is mob mentality growing and individual accoutability vanishing?

I’m sure you could add to this list. 

The Quiet Coup

Here’s the conclusion of the MIT professor Simon Johnson’s editorial

What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.

How a Roman General Beat the Terrorists.

Pompey in 67 BC beat the terrorist pirates who threatened to destroy Rome. Here’s how

 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

 

Stocks

 

Index Percentage % Volume
Dow -1.87% down
NASDQ -2.63% down
S&P500 -2.03% down
Russell2000 -3.66% -

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Technicals & Fundamentals

Technically,The price decline may look bad and Friday’s loss was almost as large as Thursday’s gains for the major indexes.  But volume fell well below average.  That’s good technical news for bulls 

In fact if you look at the leading index , the NASDQ (click on chart at side of blog) you’ll notice that there are at least three days in the past few weeks that had both big rallies and big + increased volume (those vertical green bars on the chart).  Technically, this is a about as good a sign as you can get that markets will move higher.  So buying into dips seems to still be a good strategy even though we are close to Dow 8,000 (See Positions section of blog)

The NASDQ is at 1545 (the leading index)and the two resistance levels that need to get taken (see chart) out are 1587 and 1598 to make bulls happy.  On the downside the S&P 500 is at 815  (the lagging index) with its support levels 50 day moving average at about 791 and the big 741 support level.

So technically things are looking good. but unfortunately …

Fundamentally, globalization has made this a worldwide recession.  

G 20 (basically top 20 economic countries that make up 85% of worlds GDP) meet Thursday and it sure looks like its not going to be pretty or coordinated.  The discord among these nations on how to collectively reply to the recession has sent the Japanese stocks (world’s #2 economy)  down 4.5% Monday and there were similar Asian losses. Europe down 2% to 2.5% on this and auto news.

Europe is going to call for more regulations, the US more stimulus, and China more power.  The biggest problem would be more worldwide  PROTECTIONISM. How markets move on news is one of the top two (the other is volume) indicators of market direction.

Auto’s - Stunning news as Obama administration gets tougher with autos. The GM CEO is falling on his sword - .  

Both GM or Chrysler’ s plans were rejected. Majority of GM board member will be replaced.  Debt holders, unions and others are going to have to give more.  Looks like government is going to stand behind GM cars, but the restructuring is going to be a lot tougher than originally expected –  ”pre packaged bankruptcy possible. Gov’t will stand behind warrantees  on cars. Message to Chrysler – you’re NOT too big to fail. See BusinessWeek story

The 11:00 AM Obama announcement is going to be a market mover.

This could become a bigger mess because many bond holder’s bonds were bundled and sold as credit default swaps.

Looks like the government is going to try to run a “surgical” bankruptcy on GM.

Here’s why this news is so bad for the markets short term - All the financials are now worried that they too will get treated like Autos. After all, Obama/Democrats are suppose to be pro union. So far financials have been treated with kid gloves. See Investors411 posts over the last few weeks. Financials are going to be worried that Obama administration will get tough with them too.

Reading the Tea Leaves – Good technicals, but overbought markets, G 20 discord and rejection of auto bailout sure looks like its going to overwhelm markets. S&P 500 741 support level is the line in the sand.  If we close below 790 we will probably test 741. This is not shaping up to be a good week for stocks. The icing on this collapsing cake is the monthly jobs # at end of week.

Potential new guidelines for Mark to Market come out on Thursday. This could turn around what’s setting up to be an ugly week. 

For Longer term Outlook – see Thursday’s blog.

Short Term – Time for more caution and to start protecting some of the gains over the last three weeks. 

Long Term Outlook CAUTIOUSLY BEARISH

See Changes in STRATEGY, POSITIONS, & OVERVIEW sections of blog 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING


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March 25, 2009

Market Updates- How many more bubbles have to burst?

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , ,

Today - How many more bubbles have to burst before we take action? Obama’s getting hammered by the far left, far right, & reporters  - yet he pulls off another another press conference with grace, substance, and and purpose. YOUR comments bring up some different and provocative points of view.  The one chart or index that’s on the cutting edge of the rally .  IBM and Green technology. 

Photo

Meet The Press

You can read a full transcript of last night’s press conference here. American’s demands microwave solutions and turning around the economy is not something that’s going to happen overnight. The last 8 years built a massive deficit and a massive financial problem. What Barack showed was a command not only as a communicator but in the details of what he’s trying to accomplish.

Obviously, this blog takes its shots at his administration, but I truly hope he succeeds.

You

Three different comments bring up well reasoned and different points of view. See comment section on the side of blog. 

  • Popeye – References a Bill Gross article (check out the graph in the editorial) on Shadow Banks
  • Fred Mays – Seemed to know exactly what Obama would say in his press conference and called for patience and long term thinking.
  • ewanapat - Also defended Obama and brought up his editorial that was published in 31 papers across the world.

The One Chart

Will the stock rally fizzle again? There’s one chart that’s on the cutting edge. See technical analysis section below.

IBM goes Green

IBM hops aboard high-speed rail

IBM is helping to build high speed energy efficient trains in China, Taiwan and the Netherlands. Also this is going to mean a lot of new jobs for those countries. One wonders how much of Obama’s alternative energy proposals will get cut from the budget. Full story from CNET

Cyclical vs. Structural

There are those who think that all we have to do is do nothing, others believe the shadow banking system will fix itself, others think the only problem is toxic assets. These are all reactionary solutions 

Investors411 looks at economics structurally. Granted its hard to structurally solve economic problems like energy, education and heath care with the deficit we’ve built up.  But unless we structurally change the bubbles will keep bursting and America will keep sinking. For more see Overview section of blog.

How many more bubbles have to burst before we deal with the structural problems?

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

 

Stocks

-

Index Percentage % Volume
Dow -1.49% down
NASDQ -2.52% down
S&P500 -2.03% down
Russell2000 -3.91% -

-

Technicals & Fundamentals

Stocks retreated and volume dropped.  Well over 1/2 the gains of Monday’s huge rally held up. The dip was a bit too large, but the fall in volume is just what you want to see if you are bullish or long the markets.

We are reaching one of those critical inflection points. Over the past 6 months stocks have rallied twice over 20% only to fall back into the bear market. This is the third attempt (+21%) at a breakout. There is one chart that’s on the cutting edge. If we can break the series of lower lows and lower highs on this leading index there is hope that we can end the bear market cycle.

The One Chart

It’s the NASDQ. It is leading the other indexes in performance since the bear market began.  If you look at the chart (see left hand side of blog) you’ll notice a series of lower highs on the NASDQ that started in early 2009

  • Early Jan. high of 1665,63
  • Early Feb. high of 1598.50
  • Two days ago high of 1555.77
Notice this sets up a series of lower highs.  If we can break this on the leading index then, technically, there is hope that the other indexes will follow. So NASDQ 1598.50 is the magic number or resistance level we need to rise above.
Secondary IndicatorsThe Baltic Dry Sea Index (measures flow of trade) rallied before the markets turned and over the last 5 days it’s started to fall again (see chart at side of blog)
Reading the Tea Leaves – We’ve reached the area where the other rallies have run out of steam. So what happens over the next few days is critical.  741 is the line in the sand downside benchmark on the S &P 500.  There is a less significant support level at 804 – just 2 points above where the SPX now is.
 
Best move for stocks today would be a flat to slightly higher.

Long Term Outlook CAUTIOUSLY BEARISH

See Changes in STRATEGY, POSITIONS, & OVERVIEW sections of blog 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

 

 


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March 13, 2009

Market Updates – Opened a Can of Whup Ass

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , , , , , ,

The Bulls retake the mother of all support/resistance levels. Are the Bailout Banks lying? Why Pakistan’s lawyers matter to you. Obama’s gets earmarked. Why you should date and not marry stocks and who got clobbered last night in the Jim Cramer (CNBC/financial channel) vs. Jon Stewart (comedy central) Showdown.

Jim Cramer, Jon Stewart
CNBC Photo/Giovanni Rufino; Kevin Fitzsimons/Comedy Central
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Opening a Can of Whup Ass


Jim Cramer and the financial channel got roasted, toasted and devoured last night by Jon Stewart.  Even Cramer on his 6:00 PM EST Mad Money show fessed up to the whuping that eviscerated financial reporting on CNBC.  The #1 financial channel has for years been little more than the head cheerleader of the unregulated capitalism and debt.   For more see E news story or video at Comedy Central
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`

Are Bailout Banks Lying? 

(See comment section comments by Robert H)

The old joke applies – How do you know a banker’s lying? -His/Her lips are moving
Answer – Yes and No.  It all depends on the accounting method. These bailout banks are borrowing money from the taxpayers and Fed for nothing and making a killing every time they loan the money out.  However, most have huge amounts of growing over leverage toxic assets that they do not want counted on the books. By standard mark to market accounting most major banks, like Lehman Brother, and AIG are insolvent.
 Looks like Congress (major hearing yesterday on this) will “relax” mark to market accounting. Full story from Financial Times
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Pakistan’s Lawyers March

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Afghan/Pakistan is the center of Islamic terrorism. It has been that way for over a decade. Many brave lawyers are marching from all over Pakistan to protest the government not reinstating the Supreme Court that was dismissed under the dictatorship. Aljazeera reports on the long march for justice.
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Obama get Earmarked

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Barack blew it when he approved a budget that contained almost 2% earmarks.  OK some of these earmarks are relevant, but the focus was suppose to be on creating jobs jobs, jobs then energy, health care and education, not congressional members pet projects. Story from MN Star Tribune.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

-

Index Percentage % Volume
Dow +3.46% down
NASDQ +3.97% up
S&P500 +4.07% down
Russell2000 +6.50% -

-

Technicals & Fundamentals

US and many world markets rallied again.  This time volume did NOT confirm the rally.

The Mother of All Resistance/Support Levels Falls Again -

Benchmark S&P 500 area @ 741 was retaken by the bulls. SPX closed at 752. (see Investos411 posts for end of Feb for more on this critical  technical support level) Remember its called support on the way down and resistance on the way up.

This is very significant , especially in the long term.  We broke down through the 2003 support level for about two weeks. When you think in terms of months or years the last two weeks is just a crack.

The longer we can trade above 741 the better it is for the bulls. If we can hold above this level for a week, the long term Outlook will be upgraded to Cautiously Bearish

Why You Should Date and Not Marry Stock Markets

One word – Voilitilaty.  

What’s happened is an oversold market rally. We’ve had two rallies that have gone up @20% since October. This one is a little over 1/2 way to that 20%.  The falling volume yesterday is a technical reason to worry.

But short term bullish signs are abundant -

  1. GE’s bond rating was cut yet GE was up 12%. Major companies and markets moving higher on bad news is very bullish. 
  2. Even more important is the willingness of congress to drop Mark to Market rules (see above). XLF the financial sector ETF (up 10+% yesterday) is on fire because banks will NOT have to show or mark to market their toxic assets. 
  3. The breaking of the benchmark S&P 500 – 741 resistance/support level

CAUTION: All the old problems still exist.  Technically ,retesting the bottom (an ominous 666 on the SPX) is more likely than not.

But right now ride the wave. Two days ago Investors411 suggested it was time to “nibble” again (for investors with large cash positions)  

Best Guess – flat day and rally continues next week. But, if volume continues to fall duck and cover.

Ben Bernanke will be on TV show 60 Minutes this weekend

 

Long Term Outlook = BEARS RULE

See STRATEGY, POSITIONS, OVERVIEW  & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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