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Pinkwashing

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By Yankee Bob

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Republicans

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“Mittastrophy”

(Huffington Post Headline)

In a major upset, Republican candidate Rick Santorum won major victories in three midwestern state primaries/caucuses. Absolutely toasting Romney and crushing Gingrich and Paul.

What’s so mind blowing about Santorum’s trifecta is he has raised only $2.2 million to Romney’s $57 million.

Analysis from Politico

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STOCKS

• Low volume rallies (like this one) have pushed stocks higher since our Fed introduced quantitative easing a couple years back. It is working again.

• Primary obstacles to success are politics within the USA and potential problems with Iran.

• Investors411 has a position in XHB (up 5.27%) This like most of the beaten down sectors that have rallied is over extended in the short term. It would be very heathy for these over extended sectors if  the rallied cooled down for a while.

• Combination Option Trades based on an earnings event – IR is under consideration this week. Reports 7:00 AM EST this AM. While this is NOT an official Investors411 trade – good luck to those of you in it.

• Long term Combination Options Trades considerations WLT (Takeover rumors) MCP (can move a lot based on rumors and news) and USO (based on potential Iran problems and other factors)

NB – There comes a time when a forecasting tool breaks down. – even temporarily. This usually has major significance in determining market direction.  The dollar’s drop was significant Friday, yet stocks also fell. This is BEARISH in the longer term for stocks. If US stocks can’t rally on a -0.77% fall in the dollar its time to sit up and take notice.

Reading Tea Leaves – Right now a fall on the MO to support levels of  -50 seems likely and -90 a distinct possibility this week. -50 would = a fall of roughly less than 100 Dow points.

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The Big Picture

See OVERVIEW section of blog. There are three major economic mega trends (globalization, peak oil, spread the wealth) being impacted by “casino capitalism” where huge over leveraged, unregulated, opaque, worldwide, financial institutions are allowed to exist that privatize gains and socialize risk.

What you’re watching unfold broadly is an economic restructuring and downturn, & specifically a stock meltdown. The STRATEGY section of the blog opens with the statement – The problem in the financial sector is far far far far far bigger than first imagined. Impact of this mess is going to take years to resolve. All of this was written 1 to 3 years ago.

Globally, the economic growth rate (GDP) is declining, and it’s beginning to look like even emerging markets (China) that have benifited from globalization have begun to falter. Stocks are a bit different, they can be held up by smoke & mirrors (fear & greed)

The bottom line – The more you have a working and growing middle class and upward mobility  the better off the country, countries or planet. The more you have hidden wealth, opaque institutions and a rising oligarch the worse off the planet.

Remember -Oligarchies can take many forms – Monopolies, Politburos, religiouous fundamentalist, corporate, military dictatorships, supposed democracies, etc. – but  the more you confine wealth/power to a few the plant suffers.

* The above photo was from an organization that promotes big picture books. The kind that my grand daughter loves. It has nothing to do with subject matter, except  the title.

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!

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

Technicals, Fundamentals & Analysis

Mantra for week - ” Any analysis of stocks has become an analysis of what the ”Black Boxes” of  huge institutions with their high frequency trades & computer algorithms are doing.” They make up 80% of trading and right now the huge currency markets are dictating their moves.

The Dollar War

The red army (short stocks & long the dollar) had a secret group of reinforcements in hiding that emerged yesterday.

Markets got toasted in above average, increased volume as trading went beyond the Black Boxes & currency traders and investors headed for the exits. (big volume shows some long term investors jumped ship) The red army’s reinforcements

• Dollar two day technically rally breaks out to upside of consolidation pattern (see chart)
• Oops a math error first states China’s growth as 1.7% then revised to 0.3%. Without China you can fundamentally forget worldwide growth.
• Delayed reaction to G20 nations saying they are going to raise taxes and cut spending a la Herbert Hover.
• Worries about Obama stimulus running out of gas and its impact on state governments.
• Ireland/Europe worries as FXE (ETF that tracks EURO) also breaks support level and falls a significant -0.63%.
• Consumer confidence numbers come in worse than expected.
• Tech leader AAPL closes below 50 DMA. Never a good side when you see the top US market general get hit.
• Worries over monthly employment data published on Friday
• Weak Financial Regulation reform was thown into limbo. There may not be enough votes to pass even this.

Seems like the green army (long stocks & short dollar) suffered death of a thousand cuts. The biggest cut in the short  term is China. The 41% drop in the BDI certainly predicted China and more broadly world trade was in trouble.

Market analysts will tell you that both the Dow & the benchmark S&P 500 rallied at the end of the day to finish above major support levels. (see charts at side of blog) This would be the 4th test of the 1040 low for the benchmark S&P 500. I’ve read about a double bottom & a triple bottoms, but never a quadruple bottom. Any things’s possible, but its unlikely we will stop falling here, because NASDQ is already the anchor (at new yearly low) dragging the rest of the US markets lower. = Bearish

Significant Indexes

• McClellan Oscillator (MO) fell big time to -44.39 [+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. In May the MO reached two lows – one at -120 and the other close to -130. Therefore, potential for more downside risk. = NEUTRAL, but approaching oversold
• US Dollar –  The dollar rose another yesterday +0.49% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. Dollar up = stocks down and visa versa. The dollar has risen a significant +1.03% in two days and broken out to the upside of its consolidation pattern.= Bearish
• 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@4200 to  2447 yesterday.(2482 to 2447 yesterday) This is a huge -41% drop in 6 weeks.  Often a leading indicator for stocks. Now just above a major support level (@ 150 points lower) Long term. =Bearish

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own – Updated over weekends

Have not yet had a chance to Update over last 2 weekend but there are NO positions held at this time.

Still watching DGP (ETF that’s double long gold) for a dip close to its 50 DMA – Will buy.

Don’t plan any buying or shorting (ETF that short the market) until MO reaches overbought or oversold

Time to dust off YOUR Stock List and potential ETF candidates that are holding up better than most other stocks/sectors. When the MO gets below -60 its time to start nibbling. The lower the better. Will try to go over potential candidates tomorrow. Paul or others in the comment section might have some new suggestions/stocks that are holding up well

When panic reigns we buy. We may only get a modest rally to a lower high, (hopefully sell 1/2 into 5+% gain) but we may get a longer term rally too.

Long Term Outlook = CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

JUST STOCKS

Economics – What’s happening — We have moved away from the edge of the economic cliff and now folks are realizing that the world’s economy is in trouble. Its possible that Brazil, China and India will lead us out of the mess created mostly by the USA. Time magazine’s Justin Fox has an interesting article on what has been the mantra of Investors411  here

The Baltic Dry Sea Index is a critical gauge of the world’s economy (trade) and is has broken support levels. This is NOT good news. (see below) Can’t over emphasize this chart enough!

I’ve mentioned before, the problems with Larry Summers and Obama’s economic plan .  One major problem is that the stimulus plan is back end loaded and we need the help now. We’ve only spent 10% of the stimulus so far. A lot of states would have gone under and employment would have rocketed if there was no stimulus, but the new jobs were NOT shovel ready.

Until we rebuild our financial system its hard to see any long term recovery.  So far all we’ve done is talk about it.

However, the major problem is in underestimating just how huge  the economic mess really is. See Overview & Strategy Section of blog and lots of past daily updates.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Investors411 record – 4 1/2 years of beating benchmark S&P 500 (see results click  6/25 & scroll down)

Technicals and Fundamentals

Another major meltdown in below average volume. The S&P has now fallen back down through two major support levels – its 50 & 200 day moving average. As stated before the line in the sand is 875 support level (see past updates and look at chart on side of blog) SPX at 881.

As predicted at the beginning of the week we are already challenging the major support level.

Earning season starts as Alcoa (AA) reports at the close of US markets today.

The lack of volume still troubling factor. – One things for sure-money on the sidelines is staying here. Its hard to make a long term forecast with volume as a confirming factor .

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown.

These are important forecasting tolls, but secondary to volume .

BDI - The Baltic Dry Index measures the flow of goods (world trade) . BDI fell sharply again on Monday & Tuesday. Trade has broken through its support level and that decline was confirmed by another drop Tuesday. WARNING -  The breakdown in trade is very significant to any worldwide recovery. BEARS RULE

$USD - The Dollar rose +0.34 % yesterday The strong inverse correlation between the dollar and stocks has existed for many moons. Dollar up = markets down. Dollar closed at $80.72 and has been trading for  a month between @$81+yesterday= and $79+. So the dollar nearing the top of its consolidation range. Long term Bearish pattern for Dollar ( bullish for stocks ) that is consolidating pattern now ( neutral but turning bearish )

WTIC – Oil dropped another -1.75% yesterday. and 11% over last week. (see chart) The 5 day fall has been significant and has NOT been accompanied by a significant rise in the dollar. (dollar works inversely to oil prices) What oil markets seem to be saying is demand is weak out there and the world’s economic picture is less bright than traders thought. = More Bearish news for stocks

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Back to CAUTIOUSLY BEARISH outlook. This is in anticipation of a further breakdown of the BDI and S&P 500 .   Both of these have happened.

Our Positions (For more see Positions section of Investors 411-scroll down)

Monday/Tuesday’s  Recommendation -  take some $ (1/3) off the table in China (FXI ).

The Hedge – So far the QLD has lost -10.39% and the SDS has gained +10.88% Check out Positions section on top of blog = total gain +0.49%

I plan to buy back all recommended foreign ETF’s – just hopefully at a lower level. Perhaps when  S&P dips to support level @875. Perhaps lower

Bottom Line – The BDI has rolled over. This is important.  Investors 411 has closed a lot of long positions over the last month or two. The last being 1/3 of China investment. The short term may not look good, but it should also son be another buy the dip opportunity.  We will use the BDI turning back higher as a reentry point.

More tomorrow

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

WHAT’S UP? - The Upcoming War – Shadow banks vs. the ordinary American Taxpayers: We are loosing; Simon Johnson (again) and “The Quit Coup;” Privatizing gains and socializing risk; The major issues between the shadow banks and us. Your questions on investing – When to invest & the long term outlook.

Still the best article out there describing how the shadow banks are winning  The Quiet Coup comes from Simon Johnson (former head of IMF and MIT prof)

Your Questions

 Popeye raises some interesting questions in comments section of blog.

•  Be more specific as to when to invest - The Positions section of the blog carries some specific recommendations. However I simply do not have the time to watch stocks and exactly determine when a “Buy the Dip” opportunity exactly occurs.  Also, each of you is a different kind of investor/trader. What you do depends on your level of risk.
• What about the long term? – Unless we radically change the shadow institutions privatizing gains and you socializing losses, the American economy as we know it is doomed to oblivion. What will emerge is a wealthy oligarchy and a poorer underclass. Far more bullish on some foreign economies that are building their middle classes than America’s that is diminishing its middle class. See Overview section of blog. Hope Obama can change this. (See above – The Upcoming war) More on this later.
• I try to change the Positions section each weekend. The Changes are in plum. Check it out. I do realize some of this can be unclear to less sophisticated investors/traders. So either make a comment on the blog or privately send me email. 

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

Major markets held onto most of their gains from the “Wowie Zowie” rally as volume dropped a bit. Consolidation after a major rally is bullish for equities. As long as we hold onto at least 50% of Friday & Monday’s gains the bulls are in charge of short term momentum.

XLF - The ETF that tracks financials (mostly shadow banks )Broke out of its consolidation pattern Monday and fell  -1,45% in decreased volume yesterday.  Again it looks like consolidation after a big move higher. 

Reading the tea leaves - [Longer term]  As stated in Strategy section (click on Strategy at top of blog – mostly written at the start of 2009) Dow 8000 is basically the cut off line. Below 8,000 slowly adding to positions or “nibbling” was suggested.  The Dow is now at 8,410.  

Therefore, Longer term investors should be more cautious about buying the dips. The Dow unlike the benchmark S&P 500 has not yet reached its yearly high at around 9,000. It is the trailing index.  It does have some wiggle room to move higher.

Markets are dynamic and right now Dow 9000 is probably going to be the new standard instead of 8000.  The 8000 was the standard at the beginning of the year.

It  looks like the Dow (30 major companies) will get dragged along higher by the other 3 major indexes. Short term momentum is still clearly  with the bulls. 9000 is not impossible and neither is 9654 (the November 2008 high). However -

Bottom Line – The rapidity of the bulls momentum will probably slow the higher we go.  Shadow banks  and China are still leading the bulls.  

At some point in time this year the major WAR between shadow banks and  the taxpayers over regulating financials and their size will happen. This in the short term will negatively impact stocks and in the long term impact the viability of our economy. (See above) Lots of the negatives in America’s economy are still growing.

Example – Right now according to WSJ 20% of homeowners have bigger mortgages  than the home are worth

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !