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We Bring BAD

Things to Life

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General Electric

World’s 17th Largest Company

All we want is a level playing field

Trillions of dollars are flowing into an oligarchy of  giant corporate  and wealthy individuals. One group that is  being decimated by this oligarchy is American small businesses.

Mom and Pop want to start a small business in America. They hang up a sign that says OPEN for business.

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Small business are American job creators. In a large part because they have not yet reached the size where it is profitable to outsource major components of their business.

Example: Apple Computer has 43,000 US employees and creates 700,000 jobs in Asia.

The problem is they can’t compete against the giant corporations and their Army of Lobbyists and Lawyers

The corporate oligarchy has one huge advantage

TAXES

Most American businesses are taxed at 35%. That is unless your special like Romney’s Bain Capital and other venture capital firms and hedge funds. Their taxed at 15%

The real problem is giant corporations own the politicians in Washington

What does GE pay in Taxes?

• GE Had $14.2 Billion in profits ($5.1 billion in the USA) in 2010

• GE got $10 billion+ in Bailout money because GE Financial was way over leveraged.

• GE is pays more money to lobbyists than any other firm.

• GE has a huge tax division that is run by & employs ex Treasury and IRS officials.

• GE was just fined $63 million for IRS violations.

Tax rate – Do they pay

35% – WRONG

15% -WRONG

5%- WRONG

0% –  WRONG

GE in 2010 had a tax benefit of $3.200,000,000

63% Tax Credit RIGHT ANSWER

of what they profited from in the USA

Not only is this an unfair competitive advantage, buy you the tax payer are missing out on billions in potential tax revenue.

In fact YOU (the government) owe GE $3,200,000,000

as write offs on future Taxes

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STOCKS

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• “Must Know News” – From Seeking Alpha’s Rachel Granby

Investors411 Technical Forecasting Tools.

The McClellan Oscillator

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Reading The Tea Leaves

Short Term Outlook

days, week+

• We have again bounced off support levels with a slight HFT dominated low volume  rally Friday. Momentum is with bulls.

• Path of least resistance for HFT dominated US markets is higher.

• Energy , Financials and Copper (proxy for global growth) all made significant new lows Thursday= Long Term Bearish.

• US Dollar – Investors411 has used the dollar many times before tp forecast market direction. It’s worth noting an upside breakout - Chart. That’s bearish for stocks and gold. The contrarian side of this is a strong dollar, low interest rates/inflation coupled with a weak stock market give the Fed a reason to launch another liquidity move (QE #3) This would drive stocks higher.

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Current Positions

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

See POSITIONS Section of blog for more on YSL#5.(scroll to bottom)

NLY – Will buy back into  this high dividend stock on Dip.

Gold - Major move to downside. If the Fed comes out with QE #3 gold should instantly regain its shine. For now its fallen too far too fast to buy. Traders who can handle the risk – a third gap down at open and another  significant fall should bring us to longer term support levels. GLD is at very oversold levels. Perhaps a trade, but not an investment.

Strong dollar is significant factor in gold’s meltdown.

Traders - We still have a risk on trading opportunity. Our two forecasting tools are slightly bullish, but not yet at the more extreme levels where its even safer to buy. Rising dollar is counter weight to an extended rally, but momentum with bulls.

Investors - Thursday’ lead story is the Long Term Outlook for the Fall.  If the Fed introduces more liquidity, or by some miracle without Fed help technicals show an upside breakout of the trading range we are in (S&P 500 at 1136 – Range 1120 to 1220) – Outlook remains CAUTIOUSLY BEARISH outlook remains.

You can find YSL #5 in Positions Section of blog.

No long term positions held at this time (See last Friday’s blog for more)

Disclaimer - I buy everything in the hypothetical Investors411 portfolio. If stock is mentioned and I own it you will know.

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Long Term Outlook

(for US stocks only – not our economy)

CAUTIOUSLY BEARISH*

*Investors411 has 5 different long term valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

* Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

So, you going to ignore him?

Tax and Spending

Since Obama and the Republicans answer to the shadow bank, military/industrial and other business cartels in Washington it is important to get get a more unbiased point of view on the budget. Here’s one from today’s NYT. Tax and Spending Myth and Realities A must read since  the cartels dominate the flow of information.

Military/Industrial Cartel

Just how powerful and dominate is this cartel? Their budget has gone up a staggering 81% in the last ten years.  Nothing comes close to creating debt like the military budget yet they are so powerful a cartel that neither Obama, the Republicans or the media address the problem in a substantive way.

The $700 billion yearly usually used as an approximation of the  defense department’s budget is as phoney as a three dollar bill.

• Foreign wars (Iraq, Afghanistan) are treated as supplemental budget items and not included
• Veterans affairs are not counting in this budget, yet this is closing in on 8.5% of total budget.
• Homeland Security (almost 3%) is not part of this budget and so are other smaller related military expenditures.
• Since programs like Social Security are paid for with their own tax or fees and are currently in the black they are not part of the growing federal deficit.  If you eliminate these programs as debt contributors, the military budget alone wind up contributing over 50% of the growing national debt. Some put this figure much higher

So if we take the $1,000,000,000,000+ military budget and increase it by 81% growth over the next 10 years you come up with a $4 to $6 trillion dollar increase over the next ten years that almost every politician in the USA ignores.

You’ve seen Republican’s ignore the King Kong of deficit creators in the Room (far bigger than the 800 lbs. gorilla) and today you will see Obama in a speech to the nation virtually ignore it.

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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	-0.95%	up
NASDQ	-0.96%	down
S&P 500	-0.78%	up
Russell 2000	-1.39%	-

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Technicals, Fundamentals & Analysis

Investors411 record - 6 years of beating benchmark S&P 500

BUBBLE-ICIOUS - Investors411 term for the stock market – We are all riding on the outside of an ever expanding &  Central Bank manipulated liquidity stock bubble. See Investors411 STRATEGY section for more. Remember Fed liquidity (POMO, QE 2 or quantitative easing) announced ending is June 30th.

• This is different. What has been a 3/4 day market correction has happened in light volume. Used to be we rallied in light volume and sold off in heavy volume.
• The dollar , oil and MO have fallen significantly and the likelihood of at least a technical rebound is growing (see below)
• Republicans seem to want to play politics with the Debt Ceiling. This could have a significant negative impact on stocks. More on this in later Investors411. Surprised the Wall Street part of the Republican party seems to be caving into the Tea Party wing on this.
• The key to US equities remains how accommodative the Fed can be. If it is limited by the debt ceiling or something else – watch out below. Everything will suffer.
• Fed announces POMO schedule though May 14. $80 billion, plus a second program of $17 billion. Can’t help but wonder if this second program will continue beyond the supposed end June 30th. Analysts very divided on a QE #3(more quantitative easing after June 30th)

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Shorter Term Forecasting Indexes

There are hundreds of forecasting tools, – These two tools have worked

When they stop working Investors411 will use other Indexes

• The Dollar (USD) [Any daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks]   Dollar fell moderately yesterday -0.23%.  The trend since start of year is bearish with lower highs and lower lows on chart, We are at a lower low.  For stocks = Bullish
• McClellan Index - (MO) [The very rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks .] MO fell to -51.72. Almost oversold. = Neutral/Bullish

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Reading The Tea Leaves

From yesterday – “Looks like we are in for a correction. The dip last month took the MO down to -85 (see link to chart above)” and in past has gone as low as -135.MO at -51.72 now

Bottom Line  Till it Breaks Down – No Black Swan events have been able to seriously impact the Fed liquidity driven equity market. So we are nearing a buy the dip territory.

The dollar at a low, oil prices plummeting last 2 days, and the MO nearing oversold levels shows we are ready for a rebound. If oil , the dollar & stocks continue to fall I will buy the dip. The further the better. This may only be a short term play (day, days, a week, or more).

Debt ceiling Republican soap opera politics in Washington could really hurt stocks. Question becomes will US default? Investors hate uncertainty and this is yet another bond holder to get out of treasuries.

This could kill the duration of the expected rally higher.

What to watch today – For shorter term traders Market movers.

• USO - ETF for oil - Oil up = stocks down – Big hit in last two days – for stocks – Bullish
• UUP - (Tracking ETF for dollar) Remember - The dollar is a contrarian indicator. Bad dollar = good stocks. Now bullish
• AAPL – Tech giant and market mover – Trading below its 50 DMA. Since mid February this char shows a series of lower highs and lower lows. AAPL rebounded yesterday. Perhaps the start of a rebound rally? Still, overall = Bearish
• Japan Rector Developments - This keeps getting worse.
• EEM – Emerging market ETF – On a breakout run, but getting  way over extended and now correcting.

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Positions

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

Japan – TEPCO in Japan has finally called for outside help. Even Greenpeace is on the ground saying their readings differ from TEPCO’s (science over politics) Common Dreams web site has a fascinating  real time tweeter updates TEPCO admits protracted and uncertain operation to contain crisis. Here the short version of the best video yet on the tsunami

Taxes –  GE made $14.2 billion in profits last year and over $5 billion in the USA. Guess how much they paid in taxes last year year Wait for it, Wait for it,  Wait for it – ZERO.  Now remember your taxes are due by April 15. Only in America

Financial Reform – Seems that virtually all Republicans and some Democrats are doing everything possible to make sure that those too big to fail shadow banks that destroy the meager measures the Dodd/Frank Bill put in place. The NYT’s lead editorial yesterday

Libya – This call may be premature, but it looks like after the allied/UN air strike many who supported Ka Daffy are changing sides. At least his army in the eastern 1/2 of the country has melted away. Al Jazeera reports no resistance to rebels in his home town. Huffington Post live blog

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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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Here’s the chart that demonstrates what Investors411 has been saying  since last year and why the Bulls Rule in our liquidity driven Fed manipulated stock market. (I realize most of you are sick of me saying the above again and again, but NOW is the opportunity to profit from this)

• This chart was done by Kevin McCElroy from Seeking Alpha.
• Want to know more? – Impact of POMO on Dollar by LFB from SA

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Index	Percentage	Volume
Dow	+0.41%	down
NASDQ	+0.24%	down
S&P 500	+0.32%	down
Russell 2000	+0.83%	-

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Technicals, Fundamentals & Analysis

Investors411 record - 6 years of beating benchmark S&P 500

BUBBLE-ICIOUS - Investors411 term for the stock market – We are all riding on the outside of an ever expanding &  Central Bank manipulated liquidity stock bubble. See Investors411 STRATEGY section for more

• Another weak volume liquidity driven manipulated rally on Friday.
• On the surface it looks like the rag tag exuberant bunch called rebels in Libya are winning, because oncee air strikes clobbered exposed military units resistance became almost non existent – For stock = bullish. For oil = Bearish For Ka Daffy = Bearish
• Black Swans (Big event bad news) everywhere. From John Nyaradi on this week’s outlook in stocks. Remember bad news is more often than not an elixir for stocks because it means a stronger possibility of more quantitative easing.

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Shorter Term Forecasting Indexes

• The Dollar (USD) [Any daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks]   The dollar rose significantly +0.74% Bearish longer term pattern still in place, but we have started a three day bull run For stocks = Bullish/Neutral
• McClellan Index - (MO) [The very rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks .] MO rose to +24.38 Getting oversold. Over past three months The MO has had problems getting over +30 = Bearish /Neutral

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Reading The Tea Leaves

The Bulls have had a stellar 7 day run in weak volume. (weak volume rally= calling card of a liquidity driven manipulated market)  They are starting to come up against some technical resistance that may slow them down – A rising dollar and the MO nearing overbought levels. “Merger” Monday  has historically been the best day of the week. If Ka Daffy supporters don’t have the stomach for a fight you could see rally continue. The however  perversely good news (lower oil prices if Ka Daffy looses) may turn out negative because it would mean less of a chance of QE ##

Short term rising dollar and oversold levels should hold bulls back this week.

War room

Every major group of traders is sitting in their war rooms discussing the end of QE #2 (quantitative easing) and how it will impact markets before/on/after June 30th (ending date)

Will the Fed do a QE #3? Since we have over 3 months till this happens bulls should rule unless too many traders front run what they perceive is the end of quantitative easing. Frankly, there are whole mess of investors out there who believe there will be a QE #3.

So best read of tea leaves is still bullish till June 30th. More low volume rallies. (see chart above)

What to watch today

• USO - ETF for oil - Oil up = stocks down - Now back above $100. - Headlines from Libya.
• UUP - (Tracking ETF for dollar) Remember - The dollar is a contrarian indicator. Bad dollar = good stocks
• AAPL – Trading below 50 day MA is bearish.
• Japan Rector Developments

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Positions

UWM – - Sell order  for original UWM position is a 5% trailing stop

ETF’s currently Under Consideration.

EWV for those who love risk is the ETF that is ultra short (2x) Japan. Problems there are under estimated and/0r covered up.

UCO -(2x oil prices) Why not, its also a hedge against higher gas prices. - approaching highs of last month & 2010 – I do own this ETF in other accounts and have sold covered calls on some of it.

REMX (Rare Earth ETF) - Really believe this a good long term holding. Dipped in front of a strong resistance level.

DGP – (ETF is 2X gold)also SLV (silver). Breakout on worries of future inflation – Gold is moving inversly to the dollar

DBC - (Commodities ETF) For a more complete list of commodity ETF’s see POSITIONS listed at top of blog  DBC is tilted to energy.  A good alternative would be DJP that is more agriculture and metals -

RJA (Agriculture commodities Index)An ETN, not an ETF.

UWM (2x small cap stocks) TNA (3X small cap stocks)

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

Your Stock List seems to be turning the corner and has 5 breakout stocks

3 of the 4 major indexes are above their 50 DMA’s and the NASDQ is sitting on its 50 DMA.

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

Note: Last Investors411 for the week.

Health Care, Obama and Leadership

Huffington Post Photo

Does anyone really know what Obama’s heath care plan is? NO. Unlike Hillary over a decade ago he has set broad goals – he wants to save Money. Congress has come up with a slew of different plans. Perhaps this attempt at consensus building is the best way to achieve results. After all Hillary Clinton failed.

However, the best way to show leadership is simply to lead.  Congress is fighting like chickens in a hen house over health care, each individual and side protecting her/his specific interests. The powerful interest groups who want NO change are spending huge amounts of $ to shoot down reforms health care. It’s a waste of time to go on TV to defend a non existent plan that has no concrete structure.

Obama set a charismatic vision and followed though in his campaign for president. American’s back someone who leads and right now all Obama is doing in health care is following.

Stats on Tax Rates

10% on income between $0 and $8,025

15% on the income between $8,025 and $32,550;

25% on the income between $32,550 and $78,850;

28% on the income between $78,850 and $164,550;

33% on the income between $164,550 and $357,700;

35% on the income over $357,700.

15% on investment income

For single individuals – From the Fed tax tables

An interesting editorial by Tohm Hartman called The Great Tax Con Job is worth reading. One interesting point he makes is that both times we had massive tax cuts for the wealthy they ultimately lead to a period of growing over speculation and collapse.

• Massive tax cut in 1920 from 73% to 25% led to the roaring 20′s and the Great Depression
• A 70% to 90% tax rate from 1930 to 1980 on the uber wealthy lead to America becoming the strongest economic power on the planet.
• A Reagan tax cut from 74% to 38%, later followed by cuts on investment income, and another 3% cut led to the biggest meltdown since the Great Depression.

There are some mitigating factors, but the bottom line is clear a culture that focuses on  giving massive breaks to the wealth does NOT prosper

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+0.77%	down
NASDQ	+0.36 %	up
S&P500	+0.36%	up
Russell2000	-0.33%	-

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

All the major US indexes are screaming OVERBOUGHT conditions. You can only go up so many days in a row. Only the NASDQ has shown  some moderate volume behind the move higher. This increased volume acts as confirmation of the trend.

The major US indexes have all reached new closing highs, except for small caps (the Russell 2000 is almost there) This does set up a longer or mid term bullish trend for stocks.

Check out on the bottom of the charts for the major indexes ( see list on side of blog) the CMF (Chalkin MONEY FLOW) We are over 3 standard deviations away from the mean. ( the green color is above 0.3) This is about as overbought as markets gets without some kind of reversal.

Fundamentals (earnings reports) have driven this rally.  At first company’s like Intel surprised. Others followed, but now that surprise is built into stock prices. Last night AAPL (Apple Computer) hit another grand slam home run earnings report. More here

Significant forecasting tools/Indexes for stock markets

BDI - The Baltic Dry Index measures the flow of goods (world trade) It looks like we could be forming another lower high and that would reinforce the mid term bearish pattern . The rate of decline increased on the BDI yesterday.  We have had a series of lower lows and lower highs since early June. We have a way to do before we establish a new low (see yesterday’s update), but we definitely have a momentum change. Bears are gaining momentum

In a nut shell the BDI is

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

Here’s an ominous forecast on global trade from the Director General of the World Bank. – Pascal Lamy.

$USD - The Dollar went down and tested its major support level yesterday.  It held. Dollar ended up flat +0.04% . The last remaining support level is the June lows at @78.4. The dollar index closed at 78.90 . Breaking this support would be very bearish for the dollar and bullish for stocks.

Conclusions

The “Fearless Forecast” predicted a down week because we are overbought.  Now we are way overbought , the BDI has turned negative and the dollar stopped dropping at its support level. Technically everything is turning negative. Bears are growling

Both the dollar and the BDI are the indexes to watch. If the rate of fall in the BDI increases – take more $ off the table. No one ever went broke taking profits.

Positions

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

IFN - (India)  Sold entire position yesterday. Gain @ + 3.5% See Positions section of blog.

FAS – Perhaps the third time is the charm. Last two times (see Positions) Investors411 took defensive position we got burned. Opening a small position (2.5%) in FAS (3X short the financial sector) Overbought markets & BDI falling call for some caution.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stimulus Package

Cutting taxes for Business – You cut taxes for business and what do they do? CEO and Board members get raises, dividends get increased, corporate jets get bought, stocks get bought back, esoteric derivatives get bought, or a lavish weekend party at a spa/resort/penthouse are held. OK some of the money may go for research and development or worker’s salaries, but obviously there is not much bang for the buck or accountability in cutting taxes for businesses.

The Obama stimulus plan plans to give tax cuts to those businesses that hire new workers. However, would not this money be better spent by creating demand for a product. By creating demand business would grow and new workers would be hired. This benefits both consumer and business.

Cutting Your Taxes – Sounds good and the impact is almost immediate. Bush did give us a tax cut and it did keep GDP positive for one quarter – but had no longer lasting impact and GDP for the 4th quarter is going to be something around -4.00%.

What happens to the (especially working middle class) tax cut. Some of it is used to pay down debt and some of it is saved. Commendable behavior, but that does not stimulate the economy and therefore it does not have a big bang for the buck. It’s better than cutting business taxes because it helps middle class consumers who spend on business products. The middle class spends and the economy grows.

Creating Jobs/infrastructure – Government creating private jobs through infrastructure projects. This has the biggest bang for the buck. Take building a bridge or a school. You create a job that turns an individual into a tax payer instead of a welfare recipient. What you build increases demand for businesses products – they grow. Example all the different contractor and materials that are needed to build a bridge/school are also helped. Once you have the bridge/school it benefits the individuals who use them. Example helps the flow of goods – bridge or provides a better educational environment – schools.

The problem with this is that infrastructure projects take time to get started. Red tape bureaucracy & politics get in the way. What Obama is proposing will not really have an impact till 2010.

Green Jobs – Right now hundreds of billions of dollars each year goes to petro dictators who we have become dependent on. This is an added benefit to infrastructure jobs – the money will be staying here. Of course pollution problems and global warming problems will decrease. This puts infrastructure green jobs at the top of the list.

Economist Peter Morici (see yesterday’s updates) and others have done work on how stimulus impacts markets. For more on Morici LINK

Nobel prize winning economist Paul Krugman offered his formula for stimulus yesterday LINK

Another $350 Billion

Bush has asked for another $350 billion – The Obama administration will spend this $. More on this below in "Fundamentals" section.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – $350 Billion

Index % Change Volume

Dow -1.46% up
NASDQ -2.09% down
S&P500 -2.26% up
Russell2000 -2.60% –

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals – Major US markets fell and volume especially in the financial sector rose.

XLF is the financial sector ETF Chart here . As the chart shows financials fell -5.26% yesterday in increased volume and clearly broke through support levels (11.33 see chart) XLF closed at 10.95. Financials used to be the largest sector of the market and may no longer hold that distinction. But they are certainly capable of leading all major indexes lower.

The major indexes are at their major support levels (just above or below). Volume is starting to pick up. This is never a good sign as we start to move lower. Foreign markets are following the US lead.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals – What’s happened is the Bush administration has asked congress for the second 1/2 of the poorly administered bank/financials (and auto) bailout/loans. The Obama administration will oversee the use of these funds. This has spooked stocks – especially financials. CitiGroup, the mother of all banks, broke support levels and fell 17% in huge volume. City has already twice received bailout funds. Citi is in the too big to fail category and its failure would mean a run on suspect banks worldwide.

The bottom line – Just the knowledge that the government thinks the bank/financial needs more financial help is enough to make worried investors panic and sell. This time the Panic is a bit more orderly, but with no transparency and no accountability its pretty hard to invest in a financial stock. You know they’re in trouble, especially Citigroup, but who knows which ones will go belly up and what criteria the government is using to hand out loans.

Some of these financial and other institutions have to be allowed to fail. They have to fix the accountability, transparency problems that the first bailout/loan package contained. Lot’s more on this later.

Institutions that are too big to fail need more government oversight – Ben Bernanke just said something like this AM at London School of Economics. Also expects more job losses in at least 1st 1/4 of 09 and turning this around will take time.

Obama Rally = HOPE A whole bunch of stimulus that has already been thrown at stocks, plus the composition of Obama’s economic team & his proposed stimulus package.

Earnings season begins this week.

Forecasting Future Trends

The following is a group of indexes that are all interrelated and strongly influence how stocks moves. At different times one index may be more influential than the other.

LIBOR – LIBOR is the rate banks charge each other. It price has fallen from 3.4% three months ago to about 1.16% (good news for stocks)

LIBOR chart (3 month)

Treasuries – T Bills yields show how fearful investors are. The lower the rate the more the fear. Short term yields – 3 month flat at 0.02% and longer term treasuries all fell. 10 year fell to 2.30% (low yields show fearfull investors flooding to Treasuries instead of stocks – Bad news for stocks)

Treasury Bonds chart

Baltic Dry Index – Measures flow of goods between countries. Yesterday it rose 2+% yesterday. Almost 85% drop since June. (short term good news a 2, 4, 6, & 2% gains in last 4 days)

BDI chart

We’ve seen a short term pop in international trade to go along with a solid bullish move in inter bank lending rates. Both are bullish signs. However, Panic still rules the credit markets. Prices of major banks are have again started to go south. Looks like at some time another chunk of bailout $ is going to be needed to fix banks in the future. Bush yesterday announced he’s going for the second chunk of bailout/loan money.

Short Term Outlook/Strategy

Reading the Tea Leaves-

PANIC STILL RULES the credit markets
Without credit (treasury bills/bonds) and goods (BDI) flowing, a long term stock rally is unlikely.

Strategy – Shorting rallies to protect gains is working. (see below) Until we some light at the end of the recession tunnel VOLATILITY continues to be the most predictable major stock market trend. Obama rally (stimulus package) is holding up equities right now.

We’ve seen a short term pop in international trade (BDI) to go along with a solid bullish move in inter bank lending rates (LIBOR) Both are bullish signs

Panic still rules the credit markets. Prices of major banks are have again started to go south. Looks like at some time another chunk of bailout $ is going to be needed to fix banks in the future . BINGO – Bush/Obama asked for the second half of the $750 billion bailout package.

Add a falling financial sector to the mix and the Dow 8500 support level will probably NOT hold.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded

Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally phase 2 is underway. Technical Range for 2009 – 7449 (low) and 9654.- This is a wild guess. Any sustained move above Dow 9650 is bullish.

Fundamentals – Financial transparency problem is far far far far far far far far far bigger than anyone thought. It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15 to 25+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk and dependent on oil prices
FXI (China ETF) should outperform USA

*5%+ Alternative Energy
GEX(Alternative energy ETF) Obama administration will focus on this area

*5+% Gold
GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your father’s buy and hold market – over the 8 Bush years the Dow has gone from 11,000 to 9000 and huge uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing