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.

——–

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.

——-

$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!

Investors411 record - Beating the S&P 500 for 4 1/2 years

Legislators For Sale

The reason Health Care is moving so slowly in congress is because of the massive amount of lobbying the insurance, drug and health care industries spend to distort the truth and buy legislators votes.

Keith Olbermann is not afraid to go after the Republicans and Democrats who receive massive amounts of cash from these industries for their vote. This is beyond the $1.4 million these industries are spending each day (NPR statistic) to defeat what almost every other industrialized Democracy has voted for, a public health care option.

Why have none of these countries voted to change back from their public or public/private heath care systems if they are so bad? -  Yes these other systems have problems, but they on the whole deliver statistically better care at far less cost.  The answer is Americans are bought by the big corporations. They dominate and pay for the media own the politician’s votes.

Here MSNBC’s Olbermann last night giving an example of just how owned our Senators and Congress people are – Legislators for Sale

I strongly urge you to pass this video on to your friends, email your congressman or better yet one of the wavering Politicians Olbermann mentions on health care and promise that you will send a contribution to his/her opponent if she or he fails to support a public option.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+1.25%	up
NASDQ	+1.52 %	down
S&P500	+1.53%	down
Russell2000	+1.63%	-

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

Big Rally – low volume. This rally is all based on the dollar breaking support levels and falling sharply for the second day in a row. (see dollar chart below) The products of globalized US companies who sell abroad  become less expensive when the dollar drops. Therefore, profits go up. Of course these same companies who have just fired American workers will now start to rehire foreign workers to keep up with growing demand.

Big news is jobless figures for July come out on Friday.

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 . 2975 is the major support level and the BDI closed at 3267 – down last three days in a row. As long as we hang in above 2975 stocks should do well.  This chart (click on BDI at beginning of paragraph) moves rather smoothly,

In a nut shell the BDI is

• short term – Neutral (perhaps bearish trend starting)
  
• mid term -  Bearish pattern
• long term - Bullish pattern

.

$USD - We broke that major support on Friday and dollar took another big hit Monday down -0.88% to $77.59 against a market basket of other currencies. Here’s a multi year chart of the US dollar that show the line in the sand support level or its all time low below $71.00 in April to June of 2008 .

What this means for stocks – The dollar has a long way to fall before it hits major support. Therefore, stocks (and oil prices that are tied to the dollar) have a long way to rise before this support level is reached. Bullish for stocks and could mean the rally will get extended till we near support levels.

Fearless Forecast

The dollar slipping (closing) below major support on Friday is bullish for stocks. Even though markets are overbought and oil prices rising to yearly highs (in large part because of dropping dollar) it looks like another rally week.

Buy the dips of trending sectors. See recommended Positions section at top of blog.

Positions

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

Buy the dips of recommended ETF’s (see Positions)

Adding to QLD , FXI and EWY (Korea) on dips . Also EWZ (Brazil) and EWS (Singapore)

The problem here is investors are buying the smallest of dips. We’ll keep adding until the dollar and the BDI fall to their major support levels. The Dollar dropping is key to this rally

Caution – Watching out for prices going elliptical – up too far too fast.

The Hedge – This is a major more conservative position of Investors411 (15+% of portfolio) – The long part QLD is at +19.74 and the short part SDS is at - 15.40 = Net gain of +4.34% As stated earlier at a 5+% gain we would cash (take profits) out of this investment.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

JUST STOCKS

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

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

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

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

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

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Index	Percentage %	Volume
Dow	-1.94%	flat
NASDQ	-2.31 %	up
S&P500	-1.97%	flat
Russell2000	-1.98%	-

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

Technicals and Fundamentals

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

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

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

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

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown.

These are important forecasting tolls, but secondary to volume .

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

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

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

—–

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

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

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

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

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

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

More tomorrow

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

WHAT’S UP? – Another terrorist attack in the USA – Rachel Maddow editorial on terrorism – O’ Reilly,  Boss Limbaugh, left and right wing anti Semitism, hate groups and those who water them – Obama as the #1 target. – Reading Stock tea Leaves – Change in GEX position – and more.

Terrorism in the USA

Rachel Maddow Editorial Linked Below

Photo – Virginia Sherwood for NBC

• Gun loving terrorists ambush/kill 3 Pittsburgh cops. They were afraid Obama may limit gun rights.
• Abortion Doctor killed by pro life terrorist at his church
• Army recruiter killed by newly converted Muslim Terrorist
• Latest headline – Security guard a holocaust museum killed by anti Semitic, right wing, anti government, anti black terrorist, who believed Obama was not born in the USA.

These are the last 4 major terrorist incidents involving loss of life that American Corporate media has splashed on the front pages.  Of course they missed all the deaths/terrorism due to domestic violence.  This mostly involves killing women, who may have it better here than in many other countries, but are still second class citizens in the USA.

Many in the USA are part of a violent, gun loving culture that preaches hate, loves it torture, & and is conditioned by fear mongering. Boss Limbaugh (Talk show host Rush Limbaugh) according to a recent USA Today poll is #1 person on the list of the leaders of the Republican Party (To be fair a majority thought the party leaderless) Limbaugh preaches that Obama is more dangerous that al Quaeda.

Another influential hate monger Bill O’Reilly repeatedly likened the deceased abortion doctor to Nazi doctors and called him “Baby killer.”  Even members of the far the left wing in this country has started using anti Semitic statements referring to all Jews. While its hard to prove a direct link, People like Limbaugh,  O’Reilly and others  water the ground of this hatred.

Is the threat of right wing extremism getting worse? Economic turmoil and our first black president have further enraged the hate. Rachel Maddow has an excellent editorial on her MSNBC show last night.

Obviously, the major target of all these haters is Barak Obama.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Index	Percentage %	Volume
Dow	-0.27%	up
NASDQ	-0.38 %	up
S&P500	-0.35%	up
Russell2000	-0.80 %	-

-

Technicals & Fundamentals

$USD – The dollar is the index to watch You could write a book on the dollars influence on everything but for us the bottom line right now is – When the dollar goes down -stocks and oil prices go up and visa versa.

XLF - The ETF that tracks financials (mostly shadow banks ) have been flat for three weeks. Financials has been the leading sector and as financials go so go the markets. Financials are lagging Techs. Yesterday financials down -1 .52%

WTIC - Oil prices closed up +1.89 to $71.33 As stated before – “Higher oil prices are an indication of economic recovery, but also hurt that recovery because it means energy prices will rise.”

BDI - The Baltic Dry Index measures the flow of goods (world trade). Stated before -  This is extremely important because one of the greatest obstacles to a worldwide recovery is the lack of trade between countries (protectionism) Down for sixth day in a row, but the rate of decline is slowing. This follows 24 days of going up. So extended moves the normal this index.

Reading The Tea Leaves

Volume has Never really confirmed the breakout we had last week. Even though staying above breakout levels is a confirmation, one would really like to see an increased above average 1%+ gain for major US indexes.  We keep bumping up against another breakout level and failing.

Right now, markets seem to have over extended themselves and a 10% correction would be good in the long run for stocks . Trading is very light except for the NASDQ which is near average. (Summer trading is usually light)

Conclusion – Very light trading – This is a traders market and traders move fast.  Still expect and hope for a slight pull back or consolidation.  As stated before looking for entry points/dips to buy back into  some or all of the following –  QLD, EWZ, IFN and PBW (see GEX below) –

China, India & Brazil are growing and they are leading the world out of the recession. The USA has some “green-shoots” of hope, but there are big long term problems here.

Positions – (See positions section of blog for more)

• FXI – our major position here rose +2.89% yesterday. This is the third failed attempt at a breakout. FXI was actually up 2=% more almost at a new high and pulled back.  It looks like FXI has formed a short term top.
• GEX – alternative energy - +0.77 yesterday. GEX is trading at or near anew high for the year. We are going to change to the other major ETF that does alternative energy PBW . This alternative energy ETF is more liquid but its also outperforming GEX. We have been in PBW in past years and went with GEX because it outperformed. This will be a slow transition over the next month. Already sold 1/2 position in GEX and will add that $ to PBW on a small (5%) dip.  Then sell other 1/2 and wait for a dip.
• The HEDGE – Almost no change. You can get a rough idea how this position does by looking at the difference between the NSDQ and S&P 500 – (-0.03% and multiplying it by 2) instead of looking up SDS and QLD

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING G !

WHAT’S UP? – Is Obama’s charisma and message starting to make a difference? – Major Economic caution – The Hedge – Reading the Tea Leaves

The Obama Effect?

 

Just maybe Obama’s charisma and message is making a difference. The elections in Lebanon may be the first example of this in foreign policy.

The more radical, pro Syria & Iran Hezbollah led coalition was, according to many, supposed to win. But the US backed side won about 68 to 57 with 3 independents (sources differ sightly on this result) Lots of outside money/influence by Syria & Iran vs Saudi Arabia & USA. 

Mideast expert/commentator Jaun Cole and Washington Post on this.  Now if only heavily favored Ahmadinejad would loose the elections in Iran next week.

The AP is is also carrying a story directly on Obama’s Cairo speech having a positive impact.

Major Caution on Economics

So far stock have risen on a charismatic president, hope, a few “green shoots” of economic news, truck loads of money shoveled at shadow banks/insurance companies, a tax cut, stimulus packages here and abroad. None of the problems that created this problem have been addressed is a substantive way. Too big to fail, transparency, and how to stop creating Shadow Banks have failed to be addressed. 

A point by point NYT article “We’re Still on the Brink.”

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Index	Percentage %	Volume
Dow	+0.15%	down
NASDQ	-0.03%	up
S&P500	-0.25%	down
Russell2000	-0.25%	-

-

Technicals & Fundamentals 

Major indexes closed mixed on Friday and we had a bullish week.

Good Unemployment figures should have moved stocks higher. They didn’t. How markets react to news is a good forecasting tool. – In this case little positive reaction to an improving jobs number is NOT good for stocks.

Credit Markets are tightening  over the last week or two.  Major debate between two economic camps over why this is happening.

• Side one – The economy is recovering
• Side two – Inflation is blooming.

Don’t know whose right. Perhaps both.

The Bottom Line - Interest rates are rising. That’s NOT good for housing prices and or stocks.

$USD - The Dollars fall significantly impacts the rise in oil prices (oil , for the most part is traded in dollars) Dollar rose strongly yesterday +1.63% The falling dollar has been inversely proportional to a rising stock market over the last few months. If this keeps up it may impact stocks negatively

XLF - The ETF that tracks financials (mostly shadow banks ) fell -0.88%. Unlike major stock indexes the XLF has not broken out of its consolidation trading pattern.

WTIC - Oil prices fell - 0.45% to $68.54 –  As stated before – “Higher oil prices are an indication of economic recovery, but also hurt that recovery because it means energy prices will rise.”

BDI - The Baltic Dry Index measures the flow of goods (world trade).  After what seems like almost a month of consecutive up days in a row the BDI has fallen sharply two days in a row. It is typical for this index to go many days in one direction. The reversal is not good for bulls. After @24 up days in a row, you may see this start to negatively impact stocks after about 5 down days. 

Reading The Tea Leaves  

From Friday – The longer we stay above breakout levels, the better it is for the bulls. Lack of volume is a concern and we have to watch the BDI to see if the reversal grows. Until we fall back into the consolidation pattern the new CAUTIOUSLY BULLISH outlook holds.

For about a month Monday has been the big bullish day of he week for stocks. A break in this trend would be technically bearish.

If the short term bearish reversals in the BDI and the Dollar continue to build we could see stock markets slip back into their consolidation pattern. Credit markets have tightened.  Add rising interest rates to this and at least for the short term it looks like the bears are back.

Expecting a down week.

The Hedge - New major position. See Positions section of blog. Also looking for entries/dips to EWZ (Brazil) & IFN (India)

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !