The Barbell Economy

The latest sign of our vanishing middle class and our rich on one side and the poor on the other  side or the economic barbell comes from CBS - A record 30% of American’s are borrowing from their 401k’s

If congress  focuses on tightening money for the middle class instead of  tightening for the wealthy or the military this barbell will become so big and pronounced that even Mighty Mouse will not be able to lift it.

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Syria

There is a real and bloody reloution in Syria against its dictator. It deserves more coverage. The latest Here The latest on Libya Here

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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 +0.63% Down
NASDQ +0.35% Down
S&P 500 +0.74% Down
Russell 2000 +0.58% -

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Technicals, Fundamentals & Analysis

  • Just maybe the old Nov to May pattern has returned. After all there is still 3 weeks left to the Fed’s QE #3. – Markets rose in very light volume. There was a big hunk of cash sitting at trading desks ($15 to 20 billion) thanks to Fed POMO program (QE #3) and our MO (-63) showed seriously oversold markets. It seems that the combo of Fed POMO and High Frequency Traders were responsible for almost all the trades yesterday.
  • Emerging Markets, especially China are the world’s hope for growth FXI is the ticker symbol for the ETF of 25 major Chinese stocks. Chart shows China  slightly down for the year and below its 200 day moving average. Its  sitting just above major support. Clearly bearish, but now holding that support matters more.
  • The McClellan Oscillator (MO) chart rose  to -42.46. US Stocks are moderately oversold. (anything below -30 = moderately oversold) From yesterdayA “snapback” oversold rally is possible. Stocks still moderately oversold.
  • Reading The Tea Leaves - Perhaps moderately oversold markets can push stocks higher in light volume, like seriously oversold conditions did yesterday. However the push higher was only moderate and almost 40% of it collapsed in the last  hour of trading. So far this looks like what they call a dead cat bounce.

  • Reading The Tea Leaves -. See May 20th blog for forecast for this summer.

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Positions

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

SLV/AGQ (later is very roughly 2x silver and another possibility)  SLV Sold 1/2 for +3% profit. Have raised the stop/sell order on SLV to what it was bought for.

NLYAnnaly Capital Mgt. Ultra high dividend stock. (I realize most of you do not know how to do this or perhaps understand the following, but like The Critic I have bought insurance on NLY – a July put at $18. This cost me  a bit less than 2% of NLY’s value)

Caution – Owners of NLY should look at it chart. A 3 year history show that almost every time this stock and others like it get over extended there is a sharp one day high volume significant fall. Two major declines in the last six months and we are long overdue for the pattern to repeat itself. For prospective buyers after the dip is the time to buy.

TZA(3 times short small cap stocks) Bought 1/2 position in TZA (3x short small cap stocks) at 38.65 on Tuesday   Added another 1/2 position to TZA at 39.75 at/near open Wednesday.  Bought another 1/2 TZA position at 39.75 yesterday.

Will add another full or 1/2 TZA positions on any modest market rally.

RepeatTherefore Strategy is

  • Short any rally - Investors411 will use TZA (3X short small cap stocks) and SDS (2x short S&P 500 more conservative) .
  • Sell long positions into any rally -

Disclosure - I own SLV, NLY, & TZA - I buy all stocks mentioned in the hypothetical Investors411 portfolio.

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The Fed has moved from an expanding money supply to a neutral – No QE #3. Congress is threatening to contract the money supply“We [the USA] need to grow at this point more than anything else.” Investors411 outlook will remain negative on the USA unless the Fed and/or congress return to more pro growth policies.

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Longer Term Outlook

Neutral/CAUTIOUSLY BEARISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

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Paul’s Corner Extra!

Mediocre bounce yesterday with a significant sell  off at the close,  below average volume for the day gives me the thinking this “correction” ain’t done yet. Futures at down at 8 AM and world markets are mixed.

My favorite tool for daily analysis is the HGSI High Demand Search. Top high demand groups yesterday June 9 were the HMO’s, Drugs and 3rd were the fertilizer stocks which reacted to a bad corn crop report. Of course the various oil groups were loaded in the list. Missing were the typical stocks that lead a recovery, the tech and semi’s etc. Nasdaq small cap stocks were at the bottom of the Major Market list.

Looks like a ho hum day coming and sounds like a perfect day to sip the iced tea and watch the tape crawl by without me.

Ian Woodward had a great blog post last evening. Here is an interesting side note he dropped in:

“But, then again the market climbs a wall of fear so keep an eye on the few remaining stars like NFLX that now becomes the Canary in the Coal-Mine.”

Looks like AAPL has been dropped from the throne as the stock to watch for market health. Gee we are switching from a stock that actually creates wealth in the world to a stock that the masses spend life watching instead of working and producing?

Cheers!

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