Investors & Traders- One way to quickly skim the stock section of Investors411 to see what’s happening is to count the number of Bearish, Neutral & Bullish signals. These are short term trend indicators. If all capitals are used BEARISH or BULLISH put far more emphasis on that forecasting tool. Reading The Tea Leaves will give a daily overview. The Long Term Outlook at the bottom is a forecast of where we will be in 3 to 6 months.

The Good News Message

Two days ago it was the bad news, today its the good news. Overall you have to wonder Why can’t Obama get the good news out?

• Today’s GM IPO (see below)happens and 2 weeks ago it had the best in the auto industry quarterly report. is certainly evidence that the loan by the taxpayers worked. Yes bondholders got a bigger haircut than others involved, but a rebound (think sales in China like other car companies) in such a short time is outstanding.
• Remember we did not fall off an economic a cliff When Obama took office and even the CBO worried about the second Great Depression.
• TARP – “Two years later, the big Wall Street banks have fully repaid the government with interest, and TARP, in the end, could generate a profit”  Problems exist, but big progress has been made.
• Nobody knows – The number of illegal immigrants declined last year by 800,000 (11/15 Time mag. pg.29) last year under Obama
• The $780 billion dollar stimulus plan contained a $288 billion tax cut for working Americans. Who knew? In Sept a poll showed 8% of Americans knew there was a tax cut. (see 10/28 blog post)
• Obama did get some restraints placed on Wall Street – who even knows what they are?
• Heath care reform contains many positives like closing the donut hole in medicare for seniors, additional coverage for young adults at home and much more. Why have the positives not been articulated. Who even knows what they are?
• Health care reform according to the non partisan CBO will save 10′s of billions over a decade & a trillion over 2 decades according to the non partisan CBO (see 10/28 blog) Yet Dems ran away from this legislation.
• Obama entered with a jobless rate per month near -750,000 and this month it increased to +150,000
• Obama,Dems, and a handful of Republicans passes a A $17.5  billion small business jobs bill on 3/18 and $42 billion Small Business Jobs Act bill on 9/27.
• The stock market Benchmark S&P 500) is up from a low of 666 to 1179. Amazing +77% gain off the low – yet Investors seem to hate Obama.

So you tell me why can’t the message get out?

Reading The Tea Leaves -

Do dead Cats Bounce – NO. You can tell I’m a dog person. The chart above shows what a dead cat is – a short small rally in the middle of a longer meltdown, Oversold markets, confronted by major support levels have flattened or rose a bit.  The question is – is this the bottom or the start of a small dead cat bounce?

Three paths in descending order of preference.

• Yes the bottom -TJX (Target) had a great earnings report and outlook. Oversold markets & 50DMA support levels hold. GM IPO energizes markets
• We’re in for an acceptable 5 to 10% consolidation after a nine week bull run with a S&P support level of 1130. (SPX now at 1179)
• A double dip recession is out there and Investors will soon realize the horror as foreclosures rise, Europe falls apart

The problem here is – if you combine choices the more bearish choices #s 2 & 3, are larger than #1.

The GM deal with a potential strong Christmas season and QE2′s print & dump could swing an oversold market.

Positions

• EEM –  position bought at 45.23 yesterday.

Traders. Yesterday we had a better potential for a short term trade. But the same senerio of an oversold buy the dip exists.

Investors. The MO goes below -60 buying becomes an option. Twice in the last 3 years the MO has reached -130. So you could loose out especially if there is a double dip recession. So I started small and nibbled on a little EEM (emerging market ETF) A  position at 45.28 Willing to accept a 7 or 8% loss on this. If we keep going lower I’m going to add some more EEM and country specific ETF’s on dips. (See POSITIONS Section of blog.

I think the chances of a double dip recession are remote, but a flatline US economy coupled with (right now over heated) growing emerging markets is more possible.

I hope the change to from CAUTIOUSLY BULISH to NEUTRAL was premature and this is NOT a dead cat bounce.

Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See POSITION section of blog for lists of potential stocks & ETF’s including ”YOUR Stock List.” -

Paul’s having computer issues and has been off line for a while

The Problem/The Sky is Falling/The bailout

In 2008 it became apparent to many that shadow financial institutions had become over leveraged by placing bets on mortgages (credit default swaps).

• Our unaudited Fed engineers a deal to save mortgage giant Bear Sterns and it merges with JP Morgan. No one knows what $ the Fed promised to make this happen. JPM later gets big chunk of TARP funds. Other smaller mergers happen.
• Lehman Brothers goes Bankrupt in Sept. 2008. Lehman claims lots of assets, but by the time they fell apart they had $613 billion in Debt and could only raise $1 billion in cash.
• Lehman debt spreads throughout the world, people realize how over leveraged all the other shadow financials must be, housing prices plummet, and stocks begin to fall. SPX goes from 1500 to 666.
• Treasury proposes TARP. Treasury/US government (the only entity in the world with power to stop fall) proposes to buy up bad debt and sell it later.. Paulson/Treasury later changes this to loaning shadow financials money $700 billion. ($50 billion or less has not yet been repaid)
• Stocks keep falling and QE1 introduced. Fed prints and dumps a trillion plus more dollars into economy. Finally stocks stabilize and start to move up There’s more but lets take a look at what happens if these actions do not take place

What If Absolutely Nothing Was Done?

You lived through the panic after the Lehman collapse. Now add this – What if the second largest mortgage company Bear Sterns collapsed on top of that? Add perhaps 3 time larger insurance giant AIG collapsing. It’s debt all owned to other shadow financials who themselves were up to their eyeballs in over leveraged debt. They too collapse like Lehman.

• The weekend before TARP, a run on AIG had started across the world. AIG who insured the shadow banks goes down then one bank collapsing after another because their collateral is no longer solvent. People panic and media adds to the frenzy. Everyone realizes. Lehman was just the tip of a giant iceberg of debt.
• Belly up goes AIG, BAC, Citi, Major European banks, GE, Fannie and  hundreds/thousands other major/minor financial institutions. No one knows which bank has how much debt, so people take their $ out of all banks. Fear grows hyped by the media.
• Stock market goes far lower than SPX 666
• Bonds of these banks collapse. Even with just Lehman’s collapse BAC bonds went from 100 to 82 before recovering. (An institution I am treasurer for owned these bonds)
• Financials, Fannie & Freddie bonds were the backbone of many money market funds (Think Fidelity, Vanguard etc) They or their insurance agent go belly up as the bonds become more worthless. You may have received a negative return on your money market fund depending on how are the panic had spread.
• Home prices plummet way way way way down.
• Not knowing which banks are shadow banks panicked investors pull their money from all banks. You know how suseptable your fellow Americans are to fear and fear mongering. Worldwide run on banking results. – a financial armageddon.

So a worldwide financial meltdown was averted.

That’s the good news now for the bad.

• How deep is the shadow financial hole? Fed engineered Mergers, TARP, QE1 now QE2, POMC and an UNAUDITED Fed who can had loans money at their discount window and/or use some other opaque means to fill the over leveraged gap of the opaque shadow financials.
• All of this cash used to fix the problem creates imbalances in the economic system that magnify the trillions gone into filing the shadow bank hole. Beyond my understanding, but nobel prize economists like Joe Stiglets and others get it.
• By 2008 we had already created a huge debt by going to war, cutting taxes, pork spending etc. So this new debt was built on more debt.

The UGLY

• There is no regulated financial derivatives exchange.
• We did not return to the old laws that prevented over leveraging in the past or end too big to fail. Congress passed are weaker measures.
• Dopamine When you get high the dopamine centers of your brain are activated. You get addicted to this pleasurable feeling. Sometimes like running its a heathy addiction. But with drugs or greed you keep needing bigger doses to obtain the same high. Physiologically those that run the shadow banks are not going to change their ways unless there is enforcement.

I left out stuff and will be back to Obama’s negatives next week

Mantra - “Not making any specific move until dollar breaks out of its range. I would look at a breakout higher for the dollar, and a corresponding fall in stocks and the MO to oversold as a buying opportunity for long term investors.” Looks like next Wednesday Fed meeting is the big event.

Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See POSITION section of blog for lists of potential stocks & ETF’s including ”YOUR Stock List.”

Massachusetts

Jobs/ Divided Governments

Lets take a look at two states California and my home state of Massachusetts.  California has divided government with Democrats in control of the state legislature and Arnold the Republican “terminator” as Governor for the last 8 years Massachusetts has both a a Democratic Legislature and Democrat Deval Patrick as Governor for the last 4 years

• California – 12.4 % unemployment. foreclosure abound, & education in crises mode. Government grinded to almost a hault.
• Massachusetts 8.6% unemployment, #1 in student education 2007 to 2009 (US dept. of education), and 7 straight months of jobs growth. All this with 97% of our citizens having health care for years.

If all Republicans and Democrats do is fail to compromise and like the tea party – let off steam/scream – the result can be far worse than expected when your state has a divided legislature.

Compare Massachusetts. employment rate or education rankings with that of any high population industrialized state like New Jersey (9.6% unemployment) Florida (11.7%) etc.. Right wing, CNN even rated Massachusetts as #5 on list of best states to do business in.

TARP

An in depth analysis of what it cost us to keep from economic catastrophe. Answer extremely little.

—

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

Index	Percentage	Volume
Dow	+0.39%	down
NASDQ	+0.09%	down
S&P	+0.44%	down
Russell 2000	+0.47%	-

Technicals, Fundamentals & Analysis

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

US Stock Markets -

Same Old Song - The Black Box/High Frequency Traders are buying the dips. Markets move slightly higher and volume down.

• Good news – markets move up in lighter volume
• Bad news – No worries the Fed will inject money into the economy. Currently using the POMO
• Dollar fall – Means better outlook for exporters in their earnings reports.

Here’s a stock analysis by respected Abby Joseph Cohen

Significant Indexes

• The Dollar (USD) [Anything daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] The dollar fell  -0.80% Friday.  Looks like we have had a very short consolidation. Basically free fall. Set chart to one year or more – You will see big support level at $74+. Currently dollar at $78.09. For stocks fall is = Bullish
• The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China & emerging markets] Rose a tiny +o.25% Friday.  An 8 week bull run, then a two week fall, now pushing higher. Now flat for last few sessions = Neutral
• McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.]   Rose to +22.42. Still lots of room to move higher or lower. Location= NEUTRAL

Reading Tea Leaves

Hard to see any serious stock reversal with the dollar continuing to fall. The BB/HFT’s algorithms seem to be set to buy the dip.

Earnings season is around the corner and the lower dollar should help forecast of exporters.

Positions

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

(I do manage 6 accounts that have other positions)

• EWS (Singapore)  One of several foreign ETF’s that have broken out and starting to get over extended.
• USO (price of oil/commodity). Exploded through resistance level and nearing 5 month high. Part of this is tied to dollar falling.
• SSO (2x what S&P does) 1/2 this got stopped out for small 4% gain.  A 2% trailing stop the rest set today.
• TYH (3X technology) Got stopped out for a measly 1+% profit.

Considering taking profits on 1/2 of EWS & USO. EWS is in double digits for profits and USO close. Would let the rest ride. Perhaps another 2% stop loss set near open. Both EWS & USO are longer term investments.

What happened to Green Mountain Coffee  GMCR - An almost 20% dip between close and the next day’s open is the risk you take in investing in individual stocks. Big melt ups and downs are unpredictable.  That’s why Investors411 has spent time on beating the drums for “Diversity” and “Pigs Gets Slaughtered” (See last weeks and previous updates).

Your safer owning all or a large chunk of YOUR stock List.

Same holds true for country based ETF’s but they are far less vulnerable. Only in a huge meltdown will you see them drop perhaps 4% between a close and open.

Same smaller impact for Dividend based stocks and ETF’s (see positions section of blog)

Especially if you are holding only a few stocks – we are entering earnings season and the volatility increases.

Longer Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Lots of you think of GW Bush like this but…

George Bush The Hero

Troubled Asset Relief Program (TARP) Treasury Secretary under BUSH Hank Paulson and Fed Chair Ben Bernanke sold Congress on the $700 billion insurance plan to save shadow banks. Phase 2 was carried out under OBAMA & his Treasury Secretary  Geithner

From screamers - Tea Party Patriots on the Right to Rachel Madow on the left the TARP gets bashed. Even Democrats run & hide when the TARP is brought up.

Yes it was a bait and switch by Paulson, yes it kept the shadows in business, And yes some fat cat CEO’s got fatter because of it (lots of blame to retiring Senator  Dem. Chris Dodd on the last point).

The Bottom Line – Simply a second great depression was averted. Lehman collapsed and if the other dozen or so major investment firms had fallen along with AIG, GE, GM (also add any other worldwide companies that had over leveraged positions) it would have started the dominos of panic and we’d be seeing unemployment at way over double what it is today. Imagine a dozen firms all bigger than Lehman’s going belly up and the other mega banks failing throughout the world. Add media hype. Result Great Depression #2

Story on this from Politico’s Ben Smith – TARP A Success None Dare Mention

FYI on TARP – From Wikipedia “as of April 12, 2010, is down to $89 billion, which is 42% less than the taxpayers’ cost of the Savings and loan crisis of the late 1980s.”

Postscript – 33 Hero Democrats in May of 2010 voted to break up those too big to fail shadow banks. 61 Republican & Democrat caved into the shadow financial institutions and their lobbyist.

—-

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	-0.17%	flat
NASDQ	+0.18%	up
S&P	-0.07%	down
Russell 2000	+0.47%	-

-

Technicals, Fundamentals & Analysis

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

Mantra for September - ”The Black Box/High Frequency Traders BB/HFT control the majority of trades. Jim Cramer -”BB/HFT make up 80% of trades.”

Term for the Day – High Frequency Trades - From Investopedia – “High frequency trading is an automated trading platform used by large investment banks, hedge funds and institutional investors which utilizes powerful computers to transact a large number of orders at extremely high speeds. These high frequency trading platforms allow traders to execute millions of orders and scan multiple markets and exchanges in a matter of seconds, thus giving the institutions that use the platforms a huge advantage in the open market.”

US Markets – Ended up flat in what passes now for moderate/average volume. Much less than in the past because retail investors have been exiting stock and trading is dominated by HFT’s.

Brokerages, Mutual Funds & Platforms that cater to individual or small groups of investors/traders are seeing profits diminish as retail investors continue to leave stocks.

Holding onto gains is usually a bullish sign after a major rally day. But there was a divergence in the normal relationship between the dollar and stocks that have been moving in almost 100% different directions since July. The dollar took another big hit and stocks instead of moving higher were flat. (more below)

Gold like Silver last week broke out to new highs. Mea Culpa – Investors411 talked many times about buying GLD on dips but never did.

Significant Indexes

• The Dollar (USD) [Anything daily price move over +/- 0.50 is significant. Dollar moves inversely to stocks] The dollar, fell ANOTHER HUGE -1.01% yesterday.  Dollar at 81.08 and has a another major support level at just below $80. For stocks =Bullish
• The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China & emerging markets] Fell a  -1.21% yesterday.  The BDI does not have the immediate impact that the MO or Dollar does. Two relatively minor down days in a row. Right now longer term chart pattern still = Bullish
• McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] MO fell to +45.56 yesterday. Back to = NEUTRAL

Reading Tea Leaves

We may have missed at least a short term selling or shorting opportunity. We had the MO at +61 & the Dow climbed another +60 points in to the the AM. (just short of the +100 criteria) Investor411 has only one small long position in EWS, so I took no action in the 411 account.

The Baby Bull is still alive. But…

There has been a key divergence. The dollar is in meltdown vs. other currencies. From yesterday on the dollar  “one ugly bearish chart” This dollar meltdown should have been good news for stocks. Stocks should have rallied. But they stayed flat & the MO dropped 16 points. Sometimes it takes a day for stocks to react, but, for right now, overbought stocks went nowhere despite good news in a falling dollar.

This could signal at least a short term top.

Positions

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

(I do manage 6 accounts that have other positions)

Current positions –  EWS (Singapore).

EEM (the major ETF for emerging markets) is overextended from 50 DMA. So are other breakout countries. It would be natural to see some sort of consolidation.

Along with the Baby Bull the upgrade to CAUTIOUSLY BULLISH is not yet firmly in place. We still could fall back to neutral.

Here’s the test – The MO falls to about zero or +20 and stocks rally from that point.

I’d be willing to invest/risk a bit more then. Yes its not -60 on the MO – a better entry point, but emerging markets & a falling dollar are pulling US equities along for the ride. A consolidation after a run is not to be feared. Also time to start looking at YOUR stock list

Long Term Outlook – CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

Shock & Awe for Bears

The unemployment report Friday both shocked and awed Wall Street Bears and almost all economists . Even more than the startled jumping Panda. (Thanks David Fry for photo)

The dramatic drop in job losses coupled with a positive +2.8% GDP growth for the last quarter is certainly good news for every bull on Wall Street and Main St. Economic momentum is flowing in a positive direction both in the USA & especially emerging markets.

Why?

There’s good, bad, and ugly behind the positive economic news . Since, Obama’s Afghanistan policy is such a disaster (at least to those of you who have commented and Investors411 – See additional Clinton, Gates LINK [we're nation building & there for as long as it takes] and Friedman [against surge LINK ] on Talk shows over weekend) lets start out today with the good and give Obama some credit.

There are 4 major reasons why we have seemingly turned a corner. - TARP, emerging markets, printing money, and stimulus.

TARP – Bailing out Shadow Banks was started by Paulson/ Bush and continued under Geithner /Obama.  TARP is working better than almost everyone expected. Last week Bank of America announce plans to pay back $45 billion (plus interest)and losses far less than expected. See NYT. See LINK

Emerging Markets – They kept emerging, especially China. (see past Investors411) They’re the locomotive and we are the caboose.

Printing Money – The Fed just kept printing trillions of dollars faster than a super market buys toilet paper. The unusual part is investors from around the world bought truck loads of that toilet paper in the form of US treasury bonds with insignificant interest rates. If/when rates go up, boy will those  investors have a huge supply of TP to whip their ____.

Stimulus - Around the world governments stimulated their economies with programs. You can make a case for Germany & China’s program being better than ours, but Obama’s stimulus (he was limited by Republican opposition) was relatively good.

Remember the old story of you can give a poor man a fish or you can teach him to fish. Well, economists have ways of measuring just how stimulative throwing money at a problem is. Does your dollar buy  even one fish or lots of fishes?

• The Republican mantra is always cut taxes – Mark Zandi , economist from Moody’s and a McCain’s economic adviser “making all the Bush tax cuts permanent and cutting the corporate tax rate–would raise GDP by at most 37 cents for each $1 of revenue loss. ”
  
• Obama’s stimulus – “By contrast, increased outlays for infrastructure, aid to state and local governments and extended unemployment benefits increase GDP by between $1.41 and $1.57 for every $1 spent.”

The bipartisan Congressional Budget Office measured the whole thing and you can find more on why/what stimulus worked at LINK

Common Sense – Yes there are time tax cuts work especially targeted and in a recession.

But, when you cut taxes to a company you never know where that money is going to go – Fat bonuses for executives, a new home in Dubai (the global sex slave capital of the world), buying financials WMD’s (Warren Buffett’s term for Credit Default Swaps) or sometimes even good stuff like into research & development.

What you want to have happen is DEMAND increase for your product. The more money flows, the more demand. The reason you see sources like CNBC, right wing polls and think tanks always call for tax cuts is they control the companies or the companies are their big advertisers/sponsors.  Greed is good for me is their mantra.

KISS & STOCKS

Keep It Simple Stupid

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage percentage	Volume
Dow	+0.22%	up
NASDQ	+0.98%	up
S&P500	+0.55%	up
Russell2000-+2.38%		-

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

• Brown = repeat statements
• Green = usually bullish statements
• Red = Usually bearish statements

Technicals, Fundamentals & Analysis

Economic Bears were shocked and awed at the fall in unemployment. Great news for Main Street USA, but we have a deep deep hole to climb out of.  This is mixed news for US Stocks.

The news is mixed for Wall Street, because good economic news in employment means the government/Fed will probably stimulate less. Therefore,  financial companies will no longer be able to borrow for nothing,  and their interest rates will rise sooner rather than later.  The dollar also gets stronger and those companies making more because the cheaper goods sold faster overseas will cost more – looss demand & profits.

Technically we had HUGE volume accompany a price rise. Unfortunately, for most major indexes the rally was less than a significant 1%. Stocks first went way up, then down and settled for moderate gains.

Small cap stocks, are more dependent on a recovery on Main Street did gain a significant +2.38% Bigger companies have more contracts abroad.

Fearless Forecast – Last weeks unexpected positive jobs number helped create a positive week. Investors predicted a flat to down week. Oops. This week we should be all over the place, but some solid economic fundamentals are coming into the light. This should help stocks in the long run. Once the dollar calms down (expect it to rise and gold to fall) we should improve. Flat to up week .

Now going to get a bit more technical

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

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Significant forecasting tools/Indexes for stock markets

(Besides #1 Volume & #2 Reaction to News)

BDI - The Baltic Dry Index measures the flow of goods by price (world trade) .

The BDI a small rose +45 points yesterday and closed at 4107. Technically  the BDI broke out through its major resistance level 4291 (this year’s high) over a week ago.  The BDI has rallied about 1800 points since late September. After 16 up days in a row, 9 down days in a row & now up 3 days in a row. Multi day moves in one direction are common and the decline in rate of change usually signals a reversal.

What it means – Long term we created a higher high on the chart = Bullish. The BDI is far more useful as a long term indicator of not only world trade, but specifically China and growing emerging markets. After, what looks like a technical correction we are agin moving higher.

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The Dollar is currently the #1 forecasting tool .

$USD - Check out the 6 month chart (to the left) or a multi year chart of the US dollar of the US dollar. Mantra – Dollar up = US stocks down & Dollar down = US stocks up US dollar rose an ENORMOUS +1.44% Friday . Anything close to or over +/- 0.50 is significant  The dollar closed at $75.59 .

The dollar’s rise did temper the rally, but the whole dynamic or fundamentals have changed. See Positions below.

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$NYMO The NY Stock Exchange McClellan (EOD) Index measures how much the NYSE is oversold or overbought .

The index closed at +23,51 This is a Slightly Overbought Position . This chart is showing we seemed to have reached a plateau. It’s spilled over a little bit, but the McClellan index has moved between +25 & -25 .  There has been no clear buy or sell signal for over a month.  Oversold conditions (@ -60) = buy, Overbought positions (@+60) = sell

The closer we get to +/- 60 the better our chances of making money with a shorter term buy/sell signal

Positions

The  Positions Section (top of blog) to see all the latest buys and sells

(again a little behind on latest moves)

We’ve had, and volume has confirmed, a quantum shift in markets. This may be temporary and it may be long term, but it necessitates major changes in positions.

Today is a confirmation day for Friday’s move.  More than anything else – looking for dollar to hold or add to gains.  Will buy some ETF’s and stocks until McClellan says we are overbought (@+60)

Recommended ETF’s and Trades

SELLING

GLD – Investors411 sold all of DGP several trading days ago and 1/2 of GLD on Friday. Last entry into this position was at $92.7 .  Traders should sell the rest and longer term investors could hold onto last 1/2 position (5% of portfolio).

Gold will rise again, but for now there is just too much downside momentum. Will be back into GLD & GDP late.

NVS -The flu scare is over. Thenumber of states that have serious flu has dropped from 43 to 25. Time to take profits on last 1/2 this position. Let’s take our profits 21+%

AMZN – Taking profits. Markets rallied yesterday and AMZN dropped 2.54%. Never a good sign to see NASQ rally 1% and your tech stock drop. Again, this in part, was a flu play. Why be greedy we have about a 16+% profit.

BUYING

FXI – Adding more to this positions. If Main Street is recovering faster than expected, so will China. Their currency & exports is tied to the dollar. So in one major sense, their recovery is tied, in part, to the USA. They have under performed major USA indexes recently.

IWM or UWM (an ultra fund that does basically 2x IWM) These ETF’s both track small cap stocks (Russell 2000) IF, Main Street is recovering faster than expected they should outperform the other indexes. They have under performed so far and should,like China, make up soe lost ground relative to other major US indexes.

BAC – Bank of America. They’re paying back TARP shows solid fundamental strength. (I know they are a shadow bank bad guys) Bought BAC Friday.

Start small & Build your position – Buy the dip.

Again any stock investment or ETF that doubles or triples what a normal ETF does is a short term play for traders and short term investors – NOT long term Investors .

Long Term Outlook = CAUTIOUSLY BULLISH

Teddy

Vicki Kennedy/Teddy’s Wife – photo Chris Hondros/Getty

Teddy Kennedy was once told he was the most effective legislator since Daniel Webster . He deadpanned in reply – "what did Webster do." You can view Obama’s eulogy of Kennedy "The Lion of the Senate" HERE You can read it HERE

Kennedy was such an effective legislator, his funeral this weekend rivaled that that of former Presidents or unfortunately Michael Jackson.

One of his adult sons told a story that was personal and for me exemplifies the hopes for all America. See full eulogy HERE

About 4 minutes into this eulogy he tells the following story.

When this son (Teddy Jr.) was 12 he lost his leg to cancer and a few month later there was a heavy snow storm and they went sledding. As he started to walk  his artificial leg gave way on the ice. He fell and started to cry, claiming he would never be able to make it up or down the hill. Teddy took him in his arms and said that they would make it together even if it took all day. They did. – The lesson he learned was even our most profound losses are survivable. That we can transform those horrible events into something positive.

His son ends his eulogy with the same words Teddy used at the funeral of  Robert Kennedy

"The work goes on, the cause endures, the hope still lives, and the dream shall never die "

US Profits from Repayment of Big Bank Loans

Is the TARP program working? Seems the NYT is headlining the story the  8 biggest banks have started to or repaid their government loans (TARP program) and we the taxpayers have made a $4 billion dollar profit. LINK

If you combine this with the almost unbelievable stock price run the most trouble financials have had over the last two weeks (AIG, B of A, C, Fannie and Freddie) you have to get the feeling Wall Street believes that the whole bailout program is working.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0.38%	up
NASDQ	+0.05%	up
S&P500	-0.20%	up
Russell2000	-0.67%	-

Investors411 record – 4 1/2 years of beating benchmark S&P 500

(see results for last 1/2 year – click  6/25 & scroll down)

• Brown = repeat statements
• Green = usually bullish statements
• Red = Usually bearish statements

Technicals and Fundamentals

It seems that almost all Technical analysts (from watching the financial channel and most sources I look at) expect some sort of correction – 5 to 10% if you’re bullish to the sky is falling if you’re an ultra bear. If you look at a chart of the major indexes over the last 4 trading days they have all opened and closed at almost the exact same amount. This is called "churning" and usually indicates a reversal in direction.

Therefore, FEARLESS FORECAST – is for a down week . The problem with this forecast is that it is too obvious.

The dollar, right now seems to be key factor in which direction markets move. The rise in the dollar countered some good news in stocks, especially for tech stocks . Intel increased its earnings forecast and Dell had a better than expected earnings report.

Jobless claims, although a lagging indicator, has become very important to short term stock prices. The report for August comes out Friday . Basically what’s expected is a job loss of the same as last month and the unemployment figure to rise from 9.4% to 9.6%.

WSJ is carrying a story about default in business real estate mortgages . LINK The graph is ominous, but the last two months have shown a drop. The default rate is at 3.14% which means 96.86% are not defaulting and the vacancy rate is not as high as it was in 2003. This may turn into a crisis, but right now the short turn momentum is in the opposite direction.

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S ignificant forecasting tools/Indexes for stock markets

(Besides #1 Volume & #2 Reaction to News)

BDI - The Baltic Dry Index measures the flow of goods by price (world trade) It looks like we could be forming another lower high and that would reinforce the mid term bearish pattern .  The BDI fell -04 yesterday. For right now it looks like the major technical support level is holding. Unfortunately, we have created a lower low that confirms both the mid term trend . The mid term trend since early July is clearly bearish, with a series of lower lows and lower highs. @ 2298 is a major area of support and the BDI has fallen since early June from 4291 to 2427.  This is just 129 points away from a major support level.

Technically, A flattening of the BDI is to be expected because it is near a major support level.  The big question is will support hold.

In a nut shell the BDI is

• short term - Bearish pattern
  
• mid term -  Bearish pattern
• long term - Bullish pattern

Bottom Line – Mid term trend is not good for world markets, especially countries that rely on exports. This is why countries that rely on exports are NOT now doing as well as the USA .

While this index does not have as immediate impact on stocks, as the Dollar does, it is very significant to long term worldwide economics.

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$USD - Check out the 6 month chart (to the left) or a multi year chart of the US dollar of the US dollar.

The dollar was rose +0.31 % Friday. The Dollar is in a range between $79.5 and $77.5 . A breakout to either side will seriously impact stocks. Dollar closed at $78.30. Its  major support level is @$77.5 & it has 2 major resistance levels – a falling 50 day moving ave. at $79.20 and the August highs of @ $79.5 .  If it breaks down through support stocks should rise, if it breaks up through resistance stocks should fall.

Mantra – Dollar up = US stocks down & Dollar down = US stocks up

This is the index to watch because its impact is immediate.

Positions

The whole Positions Section has been revised (Click on "Positions" at top of blog). Check it out

EWY (S. Korea) was bought at $39.9 and sold at $42.4 for a 6+ gain

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Sorry limited time this AM - 20 criminal probes into possible corruption of the $750 billion dollar government bailout have been opened;  Bank of America down 24% after earnings and Financial sector down  11.6% ;  Bears back in control of markets    

 

Ken Lewis – Head of BOA

Major Fraud Suspected in Bailout

 20 cases of fraud into the $750 billion bailout program are being opened and this may just be the tip of the iceberg. Story from LA Times. CNN Money. Washington Post/Reuters

Neil Barofsky - chief watchdog of bailout program released a 247 page report yesterday. Basic conclusion –  “TARP is ‘inherently vulnerable to fraud, waste and abuse.”

The report recommends the government abandon its partnership with private sector in buying toxic assets.

Bottom Line - Not good for confidence in stocks, the economy, the government & especially banks. As each case becomes apparent the call for banker’s heads will grow.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

STOCKS

Big 3 to 4+% losses across the board on fears of bank nationalization and poor profits. Big volume. Short term momentum definitely turning negative.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING! 

Got stuck in a massive traffic jam late last night. A major wreck on the CT/MA border. So this Investors411 is short and sweet.  

 

One editorial to bring to your attention is by American Prospect editor Bob Kuttner.  He sees team Obama’ – Rubin +Summers+ Geithner = Paulson = AIG = Wall Street.  The good news in all this – the stock markets in the short run should move higher. The bad news is the taxpayers are going to pay for Wall Street mistakes. 

What, Summers and Geithner have done is “double down” on the Paulson/Bush plan and the recent AIG debacle is just the latest example of this.  He’s disappointed with new TARP plan and offers an alternative that seems to “winning converts through out the political spectrum. 

Kuttner concludes “Barack Obama is a president of great promise, reassurance, and political skill. In the next few weeks, we will learn how he performs in a crisis that is being worsened by his own appointees.”

Long Term Outlook = CAUTIOUSLY BEARISH

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

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

 

 

Index	Percentage %	Volume
Dow	+0.04%	down
NASDQ	-0.18%	down
S&P500	-0,10%	down
Russell2000	-1.33%	-

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News

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Nationalization

It’s here. The concept of nationalization has come out of the closet and now even Bernanke and Greenspan are using the term.  Worries over nationalization have caused a meltdown in stocks, but it seems to be better choice than the systemic chaos of bankruptcies or the taxpayers continuing to to be the major shovel throwing money at the problem.

Now the big boys  Bernanke and Greenspan are  using the N word. At Investors411 (see archives) you watched this significant trend develop from a whisper to a market mover that will significantly change our governments response to the financial crisis.

Learning lessons from India

India has been terrorized by multiple terrorist attacks that have originated from inside Pakistan. Yet they have not gone to war with them unlike the Bush administration who went to war with a country that had nothing to do with WMD’s or 911. The significant Muslim population of India has rejected the Mumbai terrorists. For more see Tom Friedman’s editorial – No Way, No How, Not Here.

Helping Mortgage Holders

Finally a plan to keep the rate of foreclosures from growing. All he Paulson TARP plan did was shovel money at banks. Obama has announced a plan to help possibly 9 million threatened homeowners.  The ripple effect of not helping would bring down a lot more financial institutions and further devalue home across America. Many comments on this are like those on the stimulus plan – while significant it is not enough – NYT editorial

Israel Elections

The vast majority of elections analysts see the right wing gaining power in Israel. To most Israeli’s and Americans the war against Hamas had a far better outcome than the war against Hezbollah. Of course there are many worldwide angered by both wars. While the centrists  did barely win the most seats in Israel’s parliament the  divided right wing parties picked up a substantial majority. 

Bottom Line – The peace process has become a whole lot harder

Stanford, Another Madoff

Another this time smaller $8 billion dollar Ponzi scheme has come to light.  Seems investors thought nothing of  investing in 10% to 14% yielding CD’s controlled by the Stanford Group. Mr S is on the lamb.  

Bottom Line - Once again the understaffed, incompetent SEC is caught with its pants down. When all you had under Bush (really since Reagan) was cut cut cut government and don’t you dare dare dare regulate free markets – Stanford/Madoff and an over leveraged financial catastrophy is the result.

 

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

 

Short Term Outlook

Major US markets took a breather yesterday. Foreign markets have rebounded somewhat overnight. CNBC, the most popular financial channel (they are right wing cheer leaders corporations) has a decent morning compilation of how markets are setting up for the day.

Momentum is still with the bears.

Long Term Outlook = Bears Rule

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See STRATEGY POSITIONS & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!