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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 lineThe 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

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