Investors 411 Blog

Several of you have asked for more on stock positions so the Positions Section will be expanded for the next few days. (see below) All current and some potential positions will be covered technically (with added charts) and fundamentally. See Position Section below.

Will get back to Politics/Economics tomorrow.  There is an important section on Gold below and hopefully we have a guest editorial this week.

World’s largest Gold bar – 250 kg Toi museum Japan

KISS & STOCKS

Keep It Simple Stupid

For those of you whose eyes gloss over in the stock section I’ve tried to KISS it today, but I left a little in for those who want the deeper analysis

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+1.29%	up
NASDQ	+1.40%	down
S&P500	+1.36%	down
Russell2000	+1.73%	-

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, Fundamentals & Analysis

Big Drop in the Dollar = big rally in stocks

Volume was again anemic. Since this summer all those volume  trading systems (like the one featured on the front page of financial newspaper IBD have been virtually useless) in predicting market direction.  Markets, and human behavior that underlies the market change. So for now volume simply is not a major factor in forecasting how the US market will move.

The Dow did break out to a new yearly high. The Dow is leading because it has the greatest exposure to foreign markets. One of the major questions on Wall Street is - Are emerging markets strong enough to pull the USA out of recession?

FEARLESS FORECAST – Up Week (from yesterday)

GOLD - GLD (ETF for gold) & GDP (ETF that does 2X gold) Investors411 recommended Position

The Russian Central Bank joined India and just bought a whole bunch of gold. This is the second major central bank to buy gold.  Central banks almost always take long term positions and for many years have been dumping gold.  It sure looks like a quantum fundamental shift.  Of course other major players like China have yet to announce a purchase, but more will probably follow. If you are at all interested in GLD or GDP as a long/short term investment See Link

This ETF (see right side of blog for chart) is technically overbought – notice how far away from its blue line (50 day moving average it is)  Too far away (overbought) to buy now. However, India and now Russia have given investors solid fundamental  reasons to buy gold.  If they are net buyers instead of sellers there has got to be an eventual supply problem especially if other central banks join this club.

Buy even small dips or consolidations – Willing to bet you won’t see a dip of over 2% for another week or two. There is also a danger of GLD going parabolic.

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 has broken out to new yearly high

The BDI fell a -84 points yesterday and closed at 4423. The up 16 days in a row streak has been broken. Technically it broke out through its major resistance level 4291 (this year’s high)  The BDI has rallied about 2200 points since late September. 2 down days in a row. We moderated our losses from previous day

What it means – Long term we created a higher high on the chart = Bullish. Short term we are on the way down = Bearish The BDI is far more useful as a long term indicator of not only world trade, but specifically China and growing emerging markets.

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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 fell a significant -0.66% Friday. The dollar closed at $75.11 .  As the chart shows in late Oct the dollar fell $7500 and in mid Nov. went a bit below that. Sure looks like another fall in order.

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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 +1.06 This indicates stocks are neither oversold or overbought in the short term.

Oversold conditions (@ -60) = buy, Overbought positions (@+60) = sell

Positions

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

I did get a chance to do some editing in the Positions Section of the blog. (Note 2 added positions)

Positions overview – Investors411 favors Exchange Traded Funds (ETF’s) For some of the pure monetary reasons these market baskets of stocks are better financial investments click on HELP/EDITOR Section of blog on top. also LINK

Also – I like these market baskets because they are safer. Individual stocks are far more prone to -

• Manipulation by major investors hedge funds, brokerages, banks, rival companies, short sellers etc
• Company Events – the CEO could die, a law suit, rival announce new deal or technology, corruption etc.
• Major world Event – war, assassination of major political figure, huge geological disaster will impact both ETF’s and individual stock.
  

You could spend a couple hours each week going over all the fundamentals of each company. But, this is a suckers play.  Major investors and brokers have teams spending hundreds of hours analyzing individual stocks. Do you or do you  have someone watching computers 24/7 for every time a story about the company hits the web on that company.

Therefore, I try not to own stocks or try to make owning stocks a short term play (preferably less than a month). Less chance for an unexpected disaster. I cover some of these because YOU like stocks and I occasionally see a benefit that outweighs the risk. Of course there are some of you who know how to sell puts against downside risk and that tends to give you a better chance of NOT loosing your shirt.

So Let’s start with STOCKS Both Investors411 short term positions and potential investments. Remember its Important to know when you are going to sell. Remember KISS – Keep It Simple Stupid – I don’t drill down into lots of the fundamentals.

NVS – Novartis – LINK to Char t -

• Fundamentals – Novartis is a European Drug company with lots of decent products. It is a big Swine Flu prevention producer and that makes it hot. The dollar has gone done yet this European company has gone up (see technicals/chart)
• Technicals – Wow this is a great chart. Look at the steady trend. NVS moves in almost a straight line above its 50 day moving average (blue line)
• Buying/Selling -  Investors411 has taken 1/2 its profits NVS +12% and let the rest ride. We’re up @ + 19% now.  Will sell in Dec. when Swine flu is supposed to be worse. Considered selling yesterday because technically the stock is too high above its blue line (50 day moving average). If you want to get in – risks are greater now than in Oct when it was recommended. Wait for a dip like last Friday (see chart)

AMZN Amazon  – LINK to Chart

• Fundamentals – Amazon is an Internet retail giant that has three major advantages. Lower costs than major box retailers, no or little sales tax, growing internet use.  Add to this folks are afraid of the Swine Flu and say just 10% decide to stay home and use AMZN than risk those coughing crowds. AMZN should sparkle.  Remember Americans over react to fear mongering.
• Technicals – AMZN had a big move higher on its last earnings report. A “buy the dip” pullback in around 11/1 & another last Thrus./Fri.
• Buying/Selling – Investors411 sold 1/2 the position for an +11% gain and let the rest ride. Now up @ +14% Will sell in December. If you want to get in – of course the risks are greater now, but there is probably at least on more move higher. AMZN did (just barely) close at anew high. Buy the dip.

CSCO Cisco - Link to Chart

• Fundamentals – CSCO also had blow out earnings report and said they would be adding jobs. They made a major acquisition in the hot telecom area. It looked like the internet picks and shovels player would break out.
• Technicals – CSCO advanced like most internet companies, but failed to move higher like AMZN & others after the initial push higher. The Dow is at a new high and CSCO is still flat.
• Buying Selling – Sold all of CSCO for -1% loss a week ago. CSCO could move higher but there are a lot of other potential fish in the sea.

Tomorrow some of those other potential fish in the sea – stocks and later in the week ETF’s

Long Term Outlook - We are on the cusp of change between CAUTIOUSLY BULLISH and NEUTRAL for stocks.

Long Term Outlook = CAUTIOUSLY BULLISH

The Second Maine Militia

Second Maine Militia leaders from Time Magazine

There are three excellent comments that you should read to the right. Let’s focus on Popeye’s reference to the forming of the Second Maine Militia . – They open their yearly meeting by blasting fake TV with smiley faces and phony slogans painted on them with AK 47′s and old cannons. Article from Time magazine  LINK

They get it.  They share the view that the US government has lost its moral authority. The problem is not right vs. left, Democrats vs. Republican , but “up vs. down.” Money quote – both political parties have “ degenerated” …“into whores for wealth and arbiters of empire.”

Something the Maine 2nd militia would be up in arms about is how Tim Geithner as NY Fed chair (now Obama’s Sec. of Treasury) sold out the taxpayers by over compensating the shadow banks (or in Maine Second Militia terms “whores for wealth”) in the AIG bailout. Lead story in NYT business section LINK

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+1.33%	up
NASDQ	+1.38%	up
S&P500	+1.45%	up
Russell2000	+2.83%	-

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, Fundamentals & Analysis

KISS = Keep It Simple Stupid – The dollar rules

Dollar broke down through its $75.00 support level and the benchmark S&P 500 broke out to new yearly highs.

Volume our usual #1 confirmation factor was up, but still below average . Volume, therefore, did NOT confirm the price move. In fact over the long term the rise in stocks and decline in volume almost always signals a major reversal. But, for the last few months the Dollar rules and little else matters.

Bernanke spoke yesterday and overall he was very negative on the US economy. This is bad for Main Street and Jobs. But good for Wall Street because interest rates will remain low for a long time (Lots more on this, but limited time this AM)

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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 is @ 1+% off its high (early June) Before that it gained almost over + 630% from its all time low of 663 in Dec. of 2008 (April 2009 high of 4291 )

The BDI rose a  significant +109 points yesterday and closed at 4220. Up 13 days in a row . The BDI’s growth did slow down a little as it approaches its major resistance level at 4291 . (This years high)  The BDI has rallied about 2000 points since late September. =  Bullish for stocks & world trade right now. Especially good for our positions in FXI & EWZ

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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 was down a  significant  -0.47% yesterday. The dollar closed at $74.88 . The $75 support level has fallen . If the dollar closes below $75 today it will confirm the breakdown

Which ever side the Dollar breaks out through will set the momentum for it and the opposite will happen for US ( and most world) equities.

CAUTION – The first breakout (up or down) is often false. Right now the momentum (since the long term trend is down) is with the Dollar bears and consequently stock bulls

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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 +35.50 . This indicates stocks are overbought and The McC rose +28.62 yesterday  If we get another rally this big stocks will be clearly overbought and its definitely time for long term investors to take some profits.  No one should be adding to long positions now. Traders and shorter term investors should be considering taking profits sooner.

Even though the Dollar Rules consider overbought levels (60+) on this index a point to lighten up on stocks)

Key to chart – Zero  is roughly  neutral and roughly when you approach to @ +60 you are overbought and approaching -60 you are oversold . Buy at oversold and sell at overbought. Nothing is absolute in this chart. In fact using the moving averages as a central point is better than using zero. Nothing is absolute about the minus or plus 60 number either.

Oversold conditions = buy, Overbought positions = sell

Positions

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

Sorry have not had a chance to update Positions section in well over a week – see past updates

Investors

Comments – NOT the time to buy or add to recommended positions. (FXI, EWZ, GLD )  Enjoy the rally. Shorter term investors may want to sell part of the 3 major positions while they are at highs.

Traders (short term plays) These are not ETFs, but individual stocks

Long Term Outlook – The dollar looks like it may break down through major support and the benchmark S&P 500 is on the verge of a yearly high – Outlook will change to CAUTIOUSLY BULLISH if/when this happens. But subject to further change back to neutral since breakout was weak.

Long Term Outlook = CAUTIOUSLY BULLISH

Ben Bernanke

The NYT reports this AM that the Obama administration will keep Bernanke as Fed chair LINK Investors411 praised the choice of Bernanke as Fed chair & think its not a good idea to change horses in mid stream.

Bernanke shares some of the blame for allowing the financial meltdown, but not nearly as much as much as Greenspan . Greenspan in front of congress admitted his error.  He thought that the free markets could regulate themselves. Boy was he wrong .

As stated before a combination of the Fed chair and the Obama administration’s stimulus and loans have pulled the back from the edge of the economic cliff.

Official announcement at 9:00AM EST this AM.

Medicare, Social Security,& Health Care

These programs on the whole have been decently run by the federal government.  The problem is that post World War Two we had a population explosion called “the post war baby boom” That population explosion in the late 40′s and early 50′s is reaching maturity and will be using the assets in those programs. Thank God Lehman Brothers or the Free Market is not running these programs

The best proven  justification for a public health care option is all the other industrialized democracies (dozens) have voted to have public systems and none have voted to remove them. However American’s are so egocentric, that what generally works in other countries has less meaning here.

Economics 101 & the Recession

What the Fed and the administration have done is stimulate growth.  What they are trying to do is keep the growth alive and hope shadow banks can wind down debt. At this point, using stock prices as a measurement, this is working.  This argument is a gross oversimplification, but rally right now confirms this outlook.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+0.03%	down
NASDQ	-0.14%	down
S&P500	-0.05%	down
Russell2000	-0.22%	-

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

This is a market that is overbought and ready to reverse itself.  The Bernanke news should be good news for stocks.  However markets that need a temporary reversal (overbought) and after the rally we should see some immediate selling.

Again, check out these financials – especially the huge volume. The one fundamental that is the driving force behind the stocks surging is financials – Lets take a look at the price charts worst of the worst.

• AIG
• C
• FNM

These are the companies (AIG, CitiGroup & Fannie Mae) that were among the leaders on the downside and the trend is clearly higher.  (See above editorial) The trend is your friend and let’s ride it.

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Significant forecasting tools/Indexes for stock markets

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 - 31 on Friday . We’ve again broken a support level and formed another lower low. The rat of decline is slowing, which means a reversal is coming. 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 2468.  This is just 129 points away from a major support level.

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. exports

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 rose +0.25 % yesterday and, you guessed it, the stock rally stalled . The Dollar is in a range between $79.5 and $77.5 . A breakout to either side will seriously impact stocks. Dollar closed at $78.24. Its  major support level is @$77.5

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

A gradual reduction in the price of the dollar is part of the solution to global worldwide recession

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

Investors411 will become more involved in the financial sector. – ETF’s – XLF. UGY (2x financials) & FAS (3X financials) Investors411 will also be taking profits in some.  – Even though its not a dip lets start small and reopen the  position in financials…. Up to 20% of portfolio

The Hedge – At one point we had almost a 5% gain in this position that hedge the NASDQ 100 against the S&P.  The growing trend in financials has wiped that all out.  Investors411 is closing this position because it looks like financials will continue to drive the S&P higher. Yesterday there were massive trades (again) in those financials (shadow banks) that needed the biggest bailouts.

Closing position for zero gain.

One very important rule in investing is don’t lose money.  Fundamentally this trade is turning sour.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!