Happy New Year

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The Monster in the Room

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Investors411 believes in Transparency.

If there’s a monster in the room I want YOU to know about it. Governments, Big Business,the ruling Plutocracy, & others try to hide their actions supposedly in your interests. That, of course, is crap. They all want more power/money, usually at the expense of democracy and and your wallets.

So lets continue the Predictions for 2011 by looking at the three major economic blocks and some monsters

  • European Union - They bought into the American over leverage crony capitalism and got smacked.  Germany is the gem with an unemployment rate of 7.5%, an exporting based economy, universal health care, and a GDP  better than ours. Ireland, Greece, Portugal, Spain and Italy are the weak links (monsters) in the European Union.  Predictions – Either they all become more like the Germans or some of these countries will leave the European Union. That means huge belt tightening in the weak links – Lots of bumps in the road in 2011 as the debt problems of weaker countries are worked out.
  • Emerging Markets – For the most part they did NOT buy into our crony capitlalism. They’re also reaping the benefits of the mega trend of globalization –  booming job growth & GDP’s. The monster here is the problem of heating up too fast and growing too rapidly. There is also corruption and in some cases governments that are far less democratic.  Predictions – The bigger countries know how to play economic hardball. Their GDP is over 3 times ours. Those countries with an abundance of  limited natural resources will do better economically than others.
  • USA - Our over leveraged, opaque, crony capitalism created the world wide “Great Recession.” In the early 2000′s we went to war, cut taxes and exploded our debt. We dug a hole. Our unemployment rate is 9.8%. Globalization & politics have created a systemic problem of jobs being outsourced and now consumers abroad are becoming more & more  important to American companies growth. We have tried to fix the problem with stimulus, quantitative easing, and bailouts OUR monster is in the fact that we run an opaque capitalism. Our real GDP is in shambles if you eliminate stimulus, quantitative easing and other factors. Predictions - It looks like we can keep blowing smoke (opaque capitalism) through at least the first 1/2 of 2011.

MIT’s Simon Johnson sums up the situation and future as follows -

“Our leading bankers looted the state, plunged the world into deep recession, and cost us 8 million jobs.  And now many of them stand by with sharpened knives and enhanced bonuses – also most willing to suggest how the salaries and jobs of others can be further cut.  Think about the morality of that one.”

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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 -0.14% down
NASDQ -0.15% down
S&P 500 -0.15% down
Russell 2000 -0.07% -

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Technicals, Fundamentals & Analysis

Investors411 record – 6 years of beating benchmark S&P 500

  • Markets were flat & volume abysmal AGAIN
  • PMI, Home sales and weekly jobless figures all came in better than expected yesterday. Perhaps the reason stocks went nowhere is  because there was no POMO buying by the Fed.
  • Big cap tech stocks are looking bullish. AAPL & CSCO have moved higher and have weak volume declines in last two days. IBM is on verge of breakout.
  • Some details on today’s major events impacting markets from Seeking Alpha.

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Significant Shorter Term Forecasting Indexes

  • The Dollar (USD) [Anything daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] The dollar fell again -0.34% yesterday. In consolidation pattern. However, nearing bottom/support level of consolidation pattern. = Neutral
  • The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China, emerging markets,&  exporting countries] Again NO DATA. Perhaps its the holidays BDI is at 1,773 and is approaching its major support at 1700 = Bearish
  • McClellan Index – (MO) [The very rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] fell a bit to +19.98 = Neutral
  • 10 year T Bill (TNX)  In consolidation pattern  Some big recent moves shows big indecision = Neutral

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Reading The Tea Leaves

A most indecisive week as many major institutional traders/investors are on vacation.

ICI (Investment Company Institute) measures the flow of money in/out of mutual funds.  After 33 weeks of funds flowing out of mutual funds the last couple have sen some inflow A week or two is not a trend, but the turn is= Bullish

Investors411 mantra – The reason stocks went up while money was flowing out of mutual funds was the FED’s quantitative easing boosting stocks. So we could see a money supply surprise for early January.

  • The FED POMO program continues through April
  • New year bonuses get invested
  • Some folks are getting back into the markets

Repeat- AAPL the world’s #1 tech stock is the canary in the coal mine. If the General rolls over watch out.

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Positions

The  Positions Section link to latest & former buys and sells  - These are positions I actually own

(I do manage 6 accounts that have other positions).

Current ETF Positions. (oldest held positions listed first)(see comments section where all trades are first announced)

  • #1 UWM - (2x small cap stocks ETF) – 1/2 position
  • #2 UWM
  • EUO - (double short the EURO currency) sold all at 20.51 for -1% loss
  • UCO – (double long oil) sold all at 20.18 for -1% loss
  • SLV - (Silver ETF) Bought Wednesday at (see comments section of blog.)
  • DGP -(2x gold ETF) Bought yesterday at 41.86

Under consideration

UCO -(2x oil prices) Oil prices got over extended and a short term reversal is to be expected. The chart is bullish (series of 3 higher highs and positive slope to 20DMA) over Over the last six months each correction or consolidation seems to have been for about 10 days.

REMX (Rare Earth ETF) – Way too hot to buy now. Like a zillion investors who missed this initial jump we are waiting for a pullback. The story here is compelling. There’s a limited supply of this material and high demand. It takes 7 to 19 years to get a new mine up and running and China has almost a lock on existing supplies

EWZ (Brazil) & LBJ ( 3x Latin America – majority Brazil) Obviously the later is more risky. Both made significant moves higher in last few days. Probably due to move in rare earth metals and the fact that Brazil is rich in other needed natural resources.

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Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See POSITION section of blog for lists of potential stocks & ETF’s including “YOUR Stock List.” (YSL#3)

Note – I have changed a lot of the Chart links to include the 17 Day Moving Average. (green line)

Longer Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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