Springtime For Europe Then Reality?

We have another major solution to the Eurozone Crisis. German stock market up 4.84% at 8:20 EST and climbing.  So favorable reviews from Germany should transfer across other stock markets . Globalization at work. NYT’s #1 story today. Two biggest points.

• Greek’s default grows from 21% to 50% on bonds
• A $1.4 trillion bailout package to protect banks from  bad debt of all the debtor countries in Europe.

Zero Hedge (libertarian view) negatively dissects some of the details. - A Farce, & Springtime For Europe then Reality - Citigroup’s conclusion, does a good job at outlining what happened and next steps.

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The Lobbyists Dream Candidate

The lobbyists in Washington have chosen their Dream candidate - Mitt Romney

• He’s raised more lobbyist money than all the other Republican candidates put together
• 6 times the amount Obama raised from Wall Street

Mitt just had another Washington lobbyist fund raiser in DC and the invite list included the “Dozen” Biggest of K Street  lobbyists who run our government. Link and Link and LINK

Obama was the last presidential candidate that K Street showered  a just bit more $ on than the challenger  and the negative results are evident. This time around its not even close.

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STOCKS

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Reading Tea Leaves

• Our #1 technical forecasting tool, the McCellan Oscillator, is at +67.29 - overbought = Bearish.

• Our secondary indicator, the Put Call Ratio is at 1.01 = Neutral.

• The PCR is telling us that the professionals who use the Puts and Calls are Neutral. However, since the 50DMA of the PCP is not at 1.00, but much higher at 1.17 Sentiment = Moderately Bullish

As stated before the events in Europe trump this like they did after the 2008 meltdown.

Then, the MO fluctuated between +110 to +20 for two months. At that time there was the start of a set of solutions led by our Fed and Treasury that lite a fire under stocks for two years.

The MO should reach OMG overbought levels today (over +80). This may slow down the stampede and create some dips to buy.

• Now, it seems like the perception of investors is that  the proposed solution in Europe will do something similar tot he stimulus of 2009

• Stocks, especially financials should do better, but just like 2008 people/taxpayers will suffer in Western Democracies.

• The 25% of global growth this year that comes from China(Time magazine) is critical to bullish trend developing.

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Paul’s Corner

3 Days of Ian Woodward

This past weekend I had the great pleasure of attending the fall HGSI Workshop in Palos Verdes Ca. The workshop featured lecture by Ian Woodward and Ron Brown from HGSI. Let me give you a few of the details.

Ok ok, I can hear the moaning, “Oh no here comes more Ian Woodward and HGSI talk”. Please folks humor me, read on!

Ian and Ron’s discussion lasted for three days. Interspersed throughout the weekend there were several guest speakers who added to the value of the workshop.

Ian showed us his research behind HGSI investing and Ron gave live market demonstrations how to maximize using HGSI.  This meeting really helped us understand the undercurrent of the market. Ron and Ian showed us how to get insight using HGSI and related tools in a predictive manner.

Fred Richards – an HGSI contributor, Harvard Economics Professor and longtime expert investor gave us a great overview of the world economic stage and what to expect going forward.  Fred is a great CANSLIM type investor with decades of experience and great stories. A friend of his when growing up was William O’Neil of Investor’s Business Daily.   It was wonderful hearing Fred and by good fortune I sat next to Fred at dinner Saturday evening. Ian bought dinner for all at a wonderful Mexican restaurant

LINK

Chris White demonstrated his new software EdgeRater 5.0.   Chris demonstrated how using HGSI, one can do an end of day update across the market of index, ETFs and Stocks in just a few key strokes.  Perhaps the greatest benefit of using EdgeRater with HGSI is EdgeRater takes many of the tools developed by Ian and Ron and automates them in EdgeRater giving us a predictive look into the markets.

LINK

Chris Wilson an HGSI user demonstrated his techniques for Pairs trading.  Using HGSI and a non-proprietary set of tools using HGSI, Chris broke new ground with a technique based upon the changes in RS over time between an equity and a comparative index or ETF.

Dr. Jeffrey Scott, an HGSI user, presented stocks for consideration of our next JIRM index, our early warning indicator of a failing market.  For background, check out Ian’s blog, posted on the HGSI website: Stock Market: Doom and Gloom or Plain Sailing? September 25th, 2011.This exercise gave us early insight we are clearly seeing rotation into unusual leaders such as SBUX, KMB and MCD. This rotation reflects the current fear in the marketplace.  This was an excellent lesson in chart reading and fundamental analysis. We ended up selecting 19 high quality leaders in this exercise. Only attendees have this list and if you wish to see it you have to attend a work shop.

LINK

For me the highlight of the workshop was a brief lecture by Gil Morales (author of Trade Like an O’Neill Disciple) to review his tidea on current market conditions and update us on pocket pivots.  Gil was supposed to give an hour discussion but it soon turned into 2 ½ hour lesson of correctly shorting a stock. Gil also painted a concerned picture on the market and gave us some names to consider shorting.  Gil was an analyst for Investors Business Daily. He uses HGSI to scan for pocket pivots. A pocket pivot signal gives a very early signal that a stock is getting ready to break out. I have studied the signals for months now and they do appear to be a very good early indicator.

LINK

My wife joined me on this trip and we took some time touring Pasadena, Hollywood, Beverly Hills and Bellaire. She really enjoyed buying clothes! I was a great weekend.

We all like to talk about our best stock trade. The investment I made this past weekend with respect to time, air fare, hotel, Seminar cost has to be the best stock investment I have ever made. It was an outstanding weekend.

If any of you are serious about developing your trading skills, Ian’s next workshop is scheduled for March 24-26. I encourage you to join us.

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Positions

SPY – (ETF tracks S&P 500 or SPX) bought at 122.5 (See Monday’s blog for details)

Your Stock List#5 - Mea Culpa – Holding stocks through earnings season is always dangerous. 5 of our 14 stocks took  some big earnings hits (one on an analysts downgrade) So Paul & I have decided to drop TSU, RES, CROX, GMCR, & CPHD. Their positions will be closed at end of day. LINK to entire list (scroll down)

Future considerations – SSO (ETF that is @2X SPX) Buy on dip. Investors411 uses a buy the dip strategy in markets that are trending higher.

Bottom Line - It looks like a trend is starting. This is a significant bailout in Europe. There will probably be more. Little discussed China is the key to global growth and this trend developing.  The greatest risk is at the start of a trend, but also the biggest reward. Obviously the trend is NOT solidly in place.

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Long Term Outlook

3 to 6+ months

CAUTIOUSLY BULLISH

Investors411 has 5 different 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

CHECK ALL DATA, I MAKE MORE THAN GRAMER ERRORS.

Sometimes what life is about is wanting More Cowbell

Thanks to HG for the clip. You can see a longer than 44 second version at the above link from SNL.

The Black Boxes

Investors411 has been beating the drums over the control Black Box Entities have over your money.

The Will Ferrell link was short, simple  and funny. This link is long, technical and boring.

But if you are at all invested in stocks or concerned about market regulations  you should skim/read this piece about the High Frequency Trading that black box entities use from Zero Hedge by Tyler Durden

Black box traders have rewritten the whole concept of investing. Money quotes -

• “can clearly demonstrate that HFT is having an increasingly large impact on the microstructure of equity trading dynamics.
• Values which were once only present on the orders of several hours or days are now commonplace in the timescale of  seconds or minutes.”

Bottom Line – Competing with the Black Boxes is impossible for the ordinary trader/investor. They win. However, because they are so big they leave tracks. The problem is before the whales (big investment entities) used to move slow and the black boxes move fast. When markets crash again there will be a HUGE investigation into this kind of trading. There should be now.

I’ve tried to see some patterns that the folks who control these black boxes use. Examples – the dollar & the MO seem to have a high correlation with the majority of their algorithms. But not yet sure that these forecasting tool will work as well as in the past. Even Black Box Traders can’t ignor long term fundamentals forever.

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	+1.44%	up
NASDQ	+1.99%	up
S&P 500	+1.54%	up
Russell 2000	+3.14%	-

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

Technicals, Fundamentals & Analysis

Mantra for week (revised a little) Earnings Season begins this week. - How markets react to news has usually been the key. If a stock shrugs and goes nowhere on good earnings news you know there’s trouble ahead. Remember Black Box algorithms  dominate even more as volume declines.

Caution Black box traders that make up 50% (high volume days) to 80% (low volume days) of all trades seem to follow their own market technicals, and often eliminated volume as a major factor in price moves for indexes & sectors.

Volume rose on the AA earnings news, but was sill below average. This shows a few more traders/investors did buy. = Bullish

Intel computer like last quarter had an outstanding earnings report. Shares of the mother of all chip stocks were up +8% in pre market trading. = Bullish

Fundamentally it comes down to who do you believe – Intel says the worldwide recession is over especially in China and emerging markets and the BDI says we are falling into a double dip or extended recession especially in China and emerging markets. = ??????

Significant Indexes-

• McClellan Oscillator (MO) rose dramatically to +65.41[+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. The Black Boxes have not allowed the MO to rise above 80 since 3/09 = Bearish
• US Dollar –  The dollar fell -0.67% yesterday [Anything over +/- @0.50 is significant.] The dollar is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, have used the inverse relationship of the dollar as a key part of their trading system. This inverse relationship is part of their algorithmic system. For stocks = Bullish
• 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 of @4200 to 1790 Monday. This is a huge -57% drop in 7+ weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI fell a decreased -2.72% yesterday. You have to go back to April of 2009 to find a lower BDI. Fundamentally this is very BEARISH

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own - Updated over weekends – Investors411 holds NO position at this time. (see below)

I will be nibbling on an ETF(s) that Shorts the market today on a rally in stocks.

Hope to buy as S&P 500 rallies to resistance levels 1105, better 1112 or best @ 1125 (June high) S&P closed at 1095.  Probably use SDS. (-200% what the S&P 500 does) I will be adding ETF that short 300% when/if the market moves higher.  See yesterday’s Investors411 for options.

Logic – Intel & BDI are presenting two different fundamental pictures of world growth. You could write volumes on all the fundamental factors. The bottom line is that Black Boxes that have taken control over US markets. They have sold when the the MO got up to 80 four times this year. That’s a pretty strong resistance level.

Perhaps zillions of fresh investors will now come off the sidelines and take control. Some will, but my read the tea leaves is any rally will get sold into.

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING