*

The Big Picture

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

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

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

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

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

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

KISS & Stocks (Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage	Volume
Dow	-2.65%	up
NASDQ	-3.85%	up
S&P 500	-3.10%	up
Russell 2000	-3.99%	-

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

Technicals, Fundamentals & Analysis

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

The Dollar War

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

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

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

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

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

Significant Indexes

• McClellan Oscillator (MO) fell big time to -44.39 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. In May the MO reached two lows – one at -120 and the other close to -130. Therefore, potential for more downside risk. = NEUTRAL, but approaching oversold
• US Dollar –  The dollar rose another yesterday +0.49% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. Dollar up = stocks down and visa versa. The dollar has risen a significant +1.03% in two days and broken out to the upside of its consolidation pattern.= Bearish
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China) BDI is in free fall from a high@4200 to  2447 yesterday.(2482 to 2447 yesterday) This is a huge -41% drop in 6 weeks.  Often a leading indicator for stocks. Now just above a major support level (@ 150 points lower) Long term. =Bearish

Positions

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

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

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

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

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

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

Long Term Outlook = CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Robert Kuttner

Financial Regulations

D. In the comments sections brings up a generally favorable view of the Financial Regulations in the NYT. Here’s another glass is half full view from left wing TalkingPointsMemo. This is certainly, the most significant financial reform package in decades but it does NOT solve the major Too Big to Fail and transparency problems. Nor does it address problems within quasi government institution – Fannie and Freddie that are singlehandedly holding up the US mortgage market. That comes next.

Also much of what is legislated depends on regulators. Tea Party Patriots ‘s basically want NO regulators/regulations and the Obama administration has a far less than stellar reputation in regulators and regulations (think BP)

In a past Investors411 the Baseline Senerio revealed 4 largest shadow banks have $7.7 trillion in assets. Imagine what happens if a $2 trillion dollar over leveraged shadow bank goes down – one 5 times the size of Lehman Brothers. Simon Johnson, today, explains how JP Morgan has made itself invulnerable to financial regulation

“The reason global megabanks will get bailouts in the future is simple – policymakers will fear the chaos that would ensue when competing bankruptcy claims swarm over a defaulted institution, much as happened for Lehman (e.g., in London) in September 2008.”

The fact that Shadow Banks lead the markets higher Friday is verification that investors (those who put their money down, instead of talk) think shadow banks won.

America Speaks

America Speaks is a “bipartisan” organization that organizes American town meetings. It just had major Town Meetings across the USA on June 26th. This group was founded by a Wall Street mogul and two foundations. They “scientifically selected groups” came up with some “overwhelming” eye brow raising results.

• Raise tax rates on corporate income and those earning more than $1 million.
• Reduce military spending by 10 to 15 percent,
• Create a carbon tax and a securities-transaction tax

Bob Kuttner also goes into depth on America Speaks and Jobs Jobs Jobs.

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.o9%	up
NASDQ	+0.27%	up
S&P 500	+0.29%	up
Russell 2000	+1.89%	-

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

Technicals, Fundamentals & Analysis

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

The Upcoming Battle-

Friday’s Investors411 Outlined the sides in the Upcoming Battle. Stock Market /Currency Trading War Broke Out Friday. Major US markets had  an above average big, increased volume day - so both sides committed lots of troops (buyers and sellers) to the fight. There was lots of blood

The green army (long stocks & short the dollar) launched the first attack – led by Shadow Banks GS & JPM (the whole banking sector rose almost 3%) The dollar took it on the chin and is now sitting a mere $0.24 away from its rising front line/support level.

The red army (short stocks & long the dollar) got caught a little off guard, because so many technical analysts predicted the downfall of stocks. Despite being beat back as the dollar fall (see below) and stocks pushed marginally higher the red army support levels have held.

The MO is NEUTRAL. The BDI has turned flat So No advantage for either side here. In fact BDI’s possible turn slight advantage to greens

For fundamentals details of last week and this week see Jeff Miller in Seeking Alpha or on Friday’s monthly jobs report ( the big news of the week) and another outlook by SA’s Ophir Chandor

Fearless Forecast for the Week

Just about every technical analyst out there is bearish for stocks. However if bulls (the green army) can build Monday on Friday’s modest gains in big volume then they have a shot at moving markets higher. Last week too started out with China announcing a currency devaluation, only to learn that this was no wher near as substantive as first though.

The Shadow Banks victory in financial reform should help bulls.

Housing figures are in shambles. Investors411 mantra over the last two years has been the economic worldwide situation created by the US Shadow banking 2008 meltdown is “far far far far” worse than expected. Logic says that Friday’s employment numbers will be worse than expected. Bears should growl.

The Shadow Banks have reinforced the bulls and if they can get a follow through rally today this could help stocks for the week.

The key again is the US Dollar/EURO relationship. UUP (ETF that tracks the dollar) is the key to watch. Since there are so many expecting markets to tumble, if the Dollar breaks through support you could see a sharp rally as Black Box investors “buy to cover their short positions.”

Happy to be on sidelines for this war. Best read of tea leaves is a contrarian up/flat week into lackluster jobless figures.

Today is day 2  of the dollar falling to a key support level war. Day 1 was dominated by the green army.

Significant Indexes

• McClellan Oscillator (MO) rose significantly to -1.34 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works.= NEUTRAL
• US Dollar –  The dollar fell s yesterday -0.57% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. Dollar up = stocks down and visa versa. The dollar has fallen for the last 3 weeks, but has consolidated (traded sideways) over the last 6 days as the 50 day moving average/support level moves higher. This is where the Black Boxes have focused their attention. Dollar at $85.28 directly above major support/ 50 DMA at $85.04. Friday’s drop = Bullish
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped. BDI is in free fall from @4200 to  2501 yesterday. This is a huge -40% drop in 6 weeks.  Often a leading indicator for stocks. Now at/just above a major support level. Rate of fall declined again yesterday. This index often makes slow changes, so diminished decline  could be the start of a reversal. However, clearly long term. (decline from 2502 to 2501 is smallest possible)  = Long Term Bearish Short term Bullish

Positions

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

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

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

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

Long Term Outlook = CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Obama One Year Later

There are a number of reviews on what’s happened since Obama was elected a year ago ranging from praises that he kept us from a financial meltdown & a dramatically improved market to failure to fix the banking system and wasting money and lives nation building.

Perhaps the most read left of center blog, the Huffington Post’s namesake take  a shot at Obama LINK

A compilation of views can be found here LINK

WHAT DO YOU THINK?

Yes Men Save The World

Doggie’s Mom sent in a very positive review of a LOL comedy at your local theater on a very serious subject. These con artists tricked the BBC into believing that Dow Chemical was going to adequately compensate victims of the greatest industrial accident in the world in Bophal India. Over 10,000 have died and well over 100,000 require medical assistance for the rest of their lives. You can see a 6 minute video on the actual hoax. LINK

LINK to their site

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+0,79%	down
NASDQ	+0.20%	down
S&P500	+0.65%	down
Russell2000	-0.07%	-

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

.

The Long Term Long Term Outlook is back to NEUTRAL As mentioned last Wednesday – When the Long Term Outlook is changed we often go back and forth for a while as stocks move above or below key support levels Basically why this change was made is technically all major indexes are trading below their 50 day moving averages and US markets are not reacting to positively to some good news.

We have a bipolar , schizophrenic market. Yesterday we had about as good as it gets in economic news and investors/traders sold into that news.  The market is now considerably oversold and seems to be ripe for a rally. One very negative sector is banks.

The good news was the ISM numbers . If you don’t understand this here’s a LINK on yesterday’s Institute for Supply Managements “Very Encouraging Employment Numbers.” If all else was equal these numbers should have sent the oversold Doe up 200 to 300 + points.

What happened is the dollar moved slightly lower, so stocks moved slightly higher. The dollar index has a strangle hold on stocks.  The inverse relationship still overwhelms all other factors.  Best guess is – traders (longer term investors are totally spooked) are sitting on the sidelines waiting for another 5% to be shaved off the markets before they return.

The Dollar War - Fundamentally, individual investors see the huge and growing US debt and think its a no brainer – the dollar is toast – its going to fall.  Central Banks across the world see a weaker dollar as very bad for their economies. Example Japan their export products cost more in US & oil costs more to buy.  So many central banks across the world buy the dollar.

More so than anything else what happens hinges on the October unemployment figures that come out later this week. The ISM data predicts we’ll get an unemployment figure below 200,000 jobs lost and that should be good for stocks.

——–

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 @ 27% 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 +82 points Friday and closed at 3185. . A higher high price on its chart pattern has been confirmed The BDI has rallied @ 900 points since late September. =  Bullish for stocks & world trade right now

——-

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 dropped a modest -0.18% yesterday. The dollar closed at $76.22 .  

From yesterday – The next important resistance level for the dollar is the falling 50 day moving average (blue line on chart). This is at $76.71 this AM . So dollar is 0.49% away from major resistance. It’s the line in the sand – Best read of the tea leaves is that it will hold. In fact, Investors411 will add to some positions  as we get close to this resistance level.

Positions

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

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!