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Republicans Walk Out

Eric Cantor (Republican House majority leader) has walked out of the deficit negotiations.

Reason – he will NOT compromise on tax cuts for the richest Americans

From the Wall Street Banksters to Hedge Fund Billionaires we have seen a huge transfer of wealth in the last 30/40 years. Peter Whoriskey from WAPO is latest to come out with data. So lets mix his data with Robert Reiche.

  • 1975 – The top 1/10 of 1% = 2.5% of US income.
  • 2008 – The top 1/0 of 1%= 10.4% of US income. (They earn over 1.7 million a year)
  • Today the top 400 richest Americans pay a  only a 17% tax rate.

Wall Street Banksters,(derivative investors/players that caused the 2008 meltdown) Hedge Fund Manager  and uber wealthy  who invest in the High Frequency Trades (They make $ off the imbalances in trades) and others pay only 15% on their capital gains tax.

The uber wealthy are protected by an army of lobbyist in congress and obviously Eric Cantor and Jon Kyle.  It also sure looks like the uber’s have a piece or perhaps all of Obama on their side too. He sure hasn’t stuck his neck out and lead in  this default crisis.

China

SHIBOR The highly volatile short term interest rate levels in China have come down, but the longer term 1 year rate is steadily rising.

The following is Good news for Europe (depending on your point of view) –  China working with IMF on Europe


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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 -0.49 Up
NASDQ +0.66 Up
S&P 500 -0.28 UP
Russell 2000 +0.35 -

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Technicals, Fundamentals & Analysis

  • Yesterday looked like a flat day in big volume, but it wasn’t. The real story is that high beta/high growth stocks exploded higher in increased above average volume
  • These volatile high beta stocks and ETF’s are the playgrounds of the High Frequency Traders with their black box algorithms.
  • From yesterday - The dominate traders out there are the High Frequency Traders (this is a must read link if you are a short term trader) that make up the vast majority of the volume @ 60+% each day. These traders with their mega computers & algorithms skim and scam the rest of us. (see link above) They distort volume, especially on the more active equities. In some was they do balance each other out, but they also create major distortions in short term trading.  Long term fundamentals will rule – A company/sector/market is going to move up faster because it is growing faster than others.
  • A rally is a rally no mater what entity(ies) is manipulating it – The Fed, HFT’s or whoever. Bottom Line –  investors/ traders no longer rule stocks, but major manipulators like HFT’s, The Fed, and other major entities do.
  • Major News of morning - Two Italian banks Intesa Sanpaolo and Unicredit have had their trading halted after falling about 8%.  Obviously bad news – how bad is in the details.
  • The McClellan Oscillator (MO) chart fell to +5.23 (below -30 = somewhat overbought, above +30 somewhat overbought ) RepeatThe MO has been unable to get above the +30 to +50 range for 6 months.  So we have rally room to till MO gets to +30 to +50 range. = Neutral
  • $USD The Dollar rose  significantly +o.79% yesterday. (+/- 0.50 is a significant move and the dollar is usually a contrarian indicator)  The trend since May 1 is bullish for dollar and bearish for stocks. Another rally day like yesterday and the 5/1 rally will have a new high. For stocks short term trend = Bearish

  • Reading The Tea LeavesShorter term – From yesterday – MO now neutral, and momentum with bears. Wrong about momentum High beta stocks were able to rally in increased volume, despite a significant move higher in the dollar. Most high growth/beta stocks make their $ abroad and a stronger dollar cuts their profits. When beta stocks rallied despite the dollar’s rise it showed strengthFor now the bulls are back

  • Our MO chart has been very accurate in predicting short term tops and bottoms. So tea leaves say wait for an oversold or overbought levels to be reached before acting.
  • Reading The Tea LeavesLonger Term - No change – See May 20th blog.

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Positions

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

NLY - Annaly Capital Mgt. Ultra high dividend stock. Bought on a dip over a month ago.

TZA yesterday opened up a massive +4% higher and was way too high to buy.

Repeat longer Strategy remainsI’ll wait till the MO gets to at least +30 to short stocks

  • 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 NLY &  a group of dividend stocks which I have used some short ETF’s to protect. – I buy all stocks mentioned in the hypothetical Investors411 portfolio.

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Look for an enlightened Paul’s Corner every Tuesday & Thursday and the always informative comments section every day.

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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 and/or Euro defaults are solved.

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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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