Fatwa Against Vuvuzela

Anyone who watched the World Cup in South Africa over the last few weeks knows what a Vuvuzela is. Perhaps we are all Muslims now. The UAE issued fatwa # 11625 against vuvuzela’s whose beehive sound is too noisy at soccer matches.

Congratulations to Spain for their 1-0 victory over Holland.

YOUR comments

I received an email that contained the following statement over the weekend - “After clearly demonstrating Friday how Bush’s tax cut did nothing in raising net tax revenue next to Clinton. After factoring in inflation and population growth Bush has lost us revenue by 2009. Then you make a the completely contradictory statement ‘There are cases where cutting taxes can raise tax revenue.’ Why? “

Because its true and a well recognized fact by most economists. – However there is a balance between lots of different factors and  obviously you can’t collect no taxes and expect revenues. Maybe it will help to think the Obama Tax cut in 2009 It gets no press because a Republican did NOT make it. This works especially for almost every middle class American. Here’s how it can in the long term raise taxes.

  • You cut the taxes of a working American (Say under $100,000) That person goes right out and spends the money especially those well below the arbitrary $100,000 a year figure. They buy something and this generates money and t from sales taxes to income taxes. It bounces some folks up to higher tax brackets because their busisnesses grow. They spend more. Bottom Line – money flows faster and this generates tax revenue.
  • It also used to generate jobs. Lower taxes would create more demand and jobs would grow creating more taxpayers. However globalization has virtually killed that. If corporate taxes or payroll taxes decline a bit it does almost nothing to create jobs in the USA. These jobs go to China or another faster growing emerging market country where you can get the job done at 1/4 the price.

Right now the S&P 500 companies are sitting on a mountain of cash $1,800,000,000,000 If they wanted to they could generate millions of jobs in the USA They are simply far more interested in spending this money where it will make them more money and that’s in emerging markets.

The New BRIC’s

The term BRICK’s has been used for years to denote the faster growing big emerging market economies = Brazil, Russia, India, China and sometimes South Korea.

Now a new acronym for mid level countries leading the globalization GDP growth – CIVETS - Columbia, Indonesia, Vietnam, Egypt, Turkey, & South Africa. LINK

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 +0.58% down
NASDQ +0.97% down
S&P 500 +0.72% down
Russell 2000 +1.48% -

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

Technicals, Fundamentals & Analysis

Mantra for week Earnings Season begins this week. – How markets react to news Will be key. If a stock shrugs and goes nowhere on good earnings news you know theirs trouble ahead. Remember Black Box algorithms  dominate even more as volume declines.

We had another rally (mostly in post 2:00 EST trading) in decreased volume. 40% below average. These Black Box rallies can go on for a while in low volume  Mom & Pop investors have long since left the market.

While its difficult to understand collectively what the black boxes will do, we do have two signs indicating a reversal should be ahead.

  • The BDI (see below)
  • The MO is near overbought levels.

Here’s the bulls case for good earnings For stocks –  Bad economics can be balanced out by good earnings

Significant Indexes-

  • McClellan Oscillator (MO) rose a to +53.14 [+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. This index is on the boarder of being overbought = almost Bearish
  • US Dollar –  The dollar rose +0.14% Friday [Anything over +/- @0.50 is significant.] The dollar is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, that make up to 80% of all trades, have used the inverse relationship of the dollar as a key part of their trading system. The big move was breaking the support level two Friday’s ago which set up the rally for stocks. The swings in prices are smaller and therefore right now = Less Relevant
  • 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  1902 Friday. This is a huge -55% 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 -1.92%Friday. Rate of decline is slowing – perhaps a good sign. but overall still = BEARISH

Monday’s Fearless Forecast - Even the black boxes have not been able to push the MO over +80 for over a year. The economic news from employment in the USA to world trade & China (BDI) is not good. We seem to be running into an economic wall that even the Black Box traders will have difficulty penetrating.

The earnings surprise would have to be HUGE to penetrate over +80 on the BDI. So I’m shorting any significant rally and expecting a down week. Were still in wait and see mode. See Positions

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)

Short Term Traders - Those of you who love risk could nibble on the Direxion funds that short markets 300% (see POSITION Section at very top of blog) Some ProShares also do 300%.  I’m waiting till the +53.14 on the MO turns into over +60.

Caution – last time I waited for -54 to become -60 and missed last weeks rally.

Monitor didn’t – see comments section of blog. Also check out the in depth technical analysis of the BDI and other indexes that The Critic sent in

Investors – Sill waiting for the market to reach overbought levels (Close to +60 on the MO) but no cigar yet. The further ovesold the better. See list of ProShare that short market 200% in POSITION Section of blog. You can start to nibble when/if we get over +60 on the MO. The higher the better. Remember this may be only a trade that lasts a week.

The probability of making $ on a short (ETF that shorts an index of sector) is getting better.

Lets say there’s a 200 point rally in the Dow today – you can bet the MO will be  close to +8o or above.

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

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