Fear Mongering

Thirteen Days is a docudrama about how close two nuclear powers, each with 1000+ atomic weapons,  came to annihilating the world. It is seen from the perspective of the American presidency during the very real Cuban Missile crisis of 1962.

You may or may not agree with the films bias, but the fact is the USA was confronting not only Russia (the other country with 1000+ nuclear weapons) but also the fanatical Chairman Mao and his multi million man Chinese army and weapons at that time.The world was a far far far far far more dangerous place than it is now in comparison.

Today, we face no enemy with 1000 nukes ready to strike, yet the country has been fear mongered into an Islamaphobia over renovating a building 6 blocks from the Twin Towers where Muslims have already been praying. (short video will show what everyone is afraid of) Muslims also pray within the Pentagon at a non denominational chapel just 80 feet from where the al Quaeda hijacked plane hit.

Paul Krugman

The Nobel Prize winning economist had an excellent editorial in yesterday’s NYT. Some excerpts -

  • On Politicians who claim to care about the deficit - “these same politicians are eager to cut checks averaging $3 million each to the richest 120,000 people in the country.”
  • On Obama’s proposal to let the $680 billion tax cuts for the uber wealthy expire - “Nearly all of it would go to the richest 1 percent of Americans, people with incomes of more than $500,000 a year…the majority of the tax cuts would go to the richest one-tenth of 1 percent…the poorest members of the group have annual incomes of more than $2 million, and the average member makes more than $7 million a year.”
  • In conclusion – “this has nothing to do with sound economic policy. Instead, as I said, it’s about a dysfunctional and corrupt political culture, in which Congress won’t take action to revive the economy, pleads poverty when it comes to protecting the jobs of schoolteachers and firefighters, but declares cost no object when it comes to sparing the already wealthy even the slightest financial inconvenience”

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary


Index Percentage Volume
Dow -0.38% down
NASDQ -0.92% down
S&P 500 -0.40% down
Russell 2000 -1.33% -

Technicals, Fundamentals & Analysis

Investors411 record – 5 years of beating benchmark S&P 500

Mantra for the monthThe Black Box/High Frequency Traders BB/HFT control the majority of trades.

US stocks fell in pathetically weak volume.

Several economic data points are published this week – Housing today, Thursday’s weekly jobless number and last quarter’s GDP. All could move the market and all are expected to be bad.

Understanding The MO

An example

Are the worse than expected economic numbers this week already built into stock prices? We can’t accurately predict how much worse than expected the numbers are but we can get a general idea of how much is already built into stock prices by looking at the MO. (see below) Here’s how this works -

  • Say the numbers just come in as expected bad. The MO is at -46 or almost oversold. (-60 = our rough estimate of an oversold figure). Since things are almost oversold expected bad news is probably already built into the market and we could even rally.
  • Say economic numbers come in worse than expected bad. A little worse than expected probably won’t impact stocks too negatively because the MO at -46 shows this is already built into the market.  But if all three come in worse than the bad figures expected or, say, 2 of the 3 are much worse then down we go.
  • If the MO was already at -100, stock prices could handle the much worse than expected bad news even better.
  • If we get better than expected economic numbers you’re going to see a better than expected rally because so many folks will get cut short.

This is why the more we get oversold/the lower the MO goes the safer it is to buy. A second factor comes into play in this and that’s the existing trend or long term outlook. (more on this tomorrow)

Significant Indexes

  • The Dollar (USD)  [Anything daily price move over +/- 0.50 is significant. Dollar moves inversely to stocks] The dollar rose +0.08% yesterday.  Two week rally in place. Now facing resistance at 50DMA.  For stocks = Bearish
  • The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China & emerging markets] Rally +3.08% yesterday. 5 week Rally trend is strong = Bullish
  • McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] MO fell to -45.58 Approach oversold, but still = Neutral

Reading Tea Leaves

Even though the BDI shows the economics of emerging markets and world trade are moving in a positive direction, they will get dragged down if the Big Kahuna (the USA) falls too far.  It’s simply a matter of size.

The dollar is moving higher not because the US economy is thriving, but (for the most part) the largest economic entity the European Union & Britain (Another big Kahuna that collectively is slightly larger than the USA) is doing worse. The second reason behind this is the USA is deemed a “safe” currency relative to the rest of the world. If Israel toasts Iran at least my US treasury bond will be safe.

So right now this makes the dollar the index to watch. As stated many times before you can track this by looking at the UUP.


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

Current positions – Small positions in EWZ (Brazil) & EWS (Singapore) & USO (commodity-Oil)

Again we are getting close to oversold territory. High risk traders could consider buying a dip. Regular traders wait till we reach at last -60 on the MO to buy the dip. Investors wait for -80 or below.

Remember every investment has a risk of loss. If the long term outlook were to change to Cautiously Bearish, I’d use lower figures like -60, -80 & -100.  Stocks are trending lower within an almost year long range. The SPX did break a support level at 1070 yesterday, but until it gets close to @1020 support level the Long Term Outlook should remain Neutral.

Long Term Outlook – NEUTRAL


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