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House of Cards Photo from Dave’s Daily

Shock & Awe or House of Cards

Shock and Awe – What Investors saw yesterday was a European Central Bank willing to do whatever it takes to fix the problem.  This is just what our Fed Bank & government did and IT WORKED. We did NOT have the second great depression. It took us a while (months) for investors to figure this out. They did and stock markets boomed. The same reasoning applies to the EU central Bank. A whole bunch of investors saw fighting the Fed did not work as stocks rose. You can assume the same for the Europe.

House of Cards – The EU choose the same solution that the USA used. They  propped up the big banks that own the debt of Greece/PIIGS in Europe.  What do those banks do to solve their debt problem? The same thing US shadow banks did. Take the money and buy highly leveraged swaps.  The same thing that built the house of cards in the first place.  Have we fixed this problem in the – a definitive NO

Shorter term – probably good for markets (maybe even a year or two)

But long term you can’t keep building/pouring $ into complex, opaque, over leveraged shadow financial systems/banks and not expect another collapse.

For a bit different, more knowledgeable and far more scholarly point of view see MIT’s Simon Johnson editorial


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 +3.90% down
NASDQ +4.81% down
S&P 500 +4.40% down
Russell 2000 +5.61% -

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

Technicals, Fundamentals & Analysis

See Positions for changes made each weekend

The old pattern has returned. Stocks rallied, as expected of the UE bailout news. Volume was above average, but down @30% from the climax sell off of stocks.  Stocks and trading rose higher in the late afternoon. = Bullish

The benchmark S&P 500 closed well above its 1150 resistance level at 1159.73. S&P next major resistance level is the 50 Day Moving Average at 1171.63. Basically stocks recovered 1/2 their losses of last week in one day. = Bullish

Pre markets setting up to be weak-Down a bit less than 1%.

Significant Indexes

  • McClellan Oscillator fell  to -64.52 yesterday.  [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. - This is still OVERSOLD territory = buy = Bullish
  • US Dollar – fell  -0.46% yesterday. [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important  Dollar is down from last Thursday’s closing and Friday’s interday high. Still close to breakout levels = Neutral
  • The BID – has broken out to a new 5 month high. The Baltic Dry Index measures the cost or flow of goods/trade between countries. Goods costing more means trade is increasing = Bullish

Positions

The  Positions Section = latest buys and sells – (Revised positions last weekend) - These are positions I actually own

The BDI’s breakout is bullish for both Brazil EWZ and FXI (China) Buy the dip.

YOUR STOCK LIST

Dramatic revisions – Some of our old stocks simply did NOT make the cut

Caution - This is mostly just technical analysis and lots of other factors enter into a decision to buy or sell

  • Last Week’s comments in black. Since I missed last week’s comments they are out of date so no past comments.
  • This week’s in black.
  • Ticker symbols are links to charts.
  • Line means stock is in danger of being taken off list.

If you have trouble with terminology email me. 5oDMA = 50 Day Moving Average - blue line on chart.

Most of you are looking for longer term buys. Remember Stocks are in most cases riskier than most ETF’s. Our main strategy is to buy the dip of a stock that is trending higher. The reason some of the stocks did not make the cut was that they fell too far and/or volume was too big behind the fall.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

  • CAAS –   (China stock) Like the GOOG of China BIDU – This stock is going to rise or fall with China. The BDI has broken out & that’s good for China. Like almost every stock CAAS broke its bullish pattern last week, but downside volume was not too large. Risky buy the dip.
  • PCLN –   Another stock that held up well (Fell but volume not too big) Unfortunately had poor earnings results last night.
  • FToo much downside volume, weak recovery yesterday
  • CSCO,    Like (AMZNAAPL)  the big three two horsemen of tech stocks. CSCO & AAPL make it back because they outperformed tech stocks yesterday. If tech is to recover so will CSCO & AAPL. Cautious Buy the Dip.
  • SHOO –  Fell a long way, but bounced off its 50 DMA. Weaker than expected recovery yesterday. Cautious buy the Dip
  • ICON,     Fell to 50 DMA in weak volume last week. Yesterday had strong volume recovery Buy the Dip.
  • DGIT –   Actually rose last week. Consolidating. If markets move up this one could explode. Overextended from 50 DMA Tempting watch for breakout.
  • *VCI. Another stock that held up well last week. Had a breakout to a new high in big volume yesterday. Buy the Dip
  • CREE –  Too big a fall in big volume and yesterday’s recovery in weak volume..
  • SNDK – Didn’t fall too far, but in big volume. Yesterday’s recovery in weak volume. back in its pattern Very Slight hesitationBuy the Dip (I own this as a day/swing trade)
  • CTRP – Should be toast. Fell all the way to its 200DMA, but had a strong recovery in big volume yesterday Risky buy the dip
  • *ESRX (Express Scripts) Added to position on Friday Love the story behind this major prescription provider.  Held up fairly well and had strong day yesterday in reasonable volume. Near breakout levels. ESPX like CSCO not as volatile as the rest. slower steadier - Buy the dip

IMAX is Investor’s411 #1 recommended stock. The others are theater chains that benefit from raised 3d ticket prices but have all under performed and now are gone.

  • *CNK (Cinemark) Held up though last week, but fell below 59 DMA yesterday – Sell into rally
  • RGC (Regal Entertainment)  Fell too far in big volume. weak volume average recovery yesterday
  • *IMAX . Added to position on Friday. Fell to its 50DMA in weak volume and had a weak volume recovery yesterday. Recovery was disappointing. Wait for dip to 50 DMA.
  • CKEC (Carmike Cinemas) Fell way too far. Far too volatile

New Additions

  • VLTR . Started falling before last weeks meltdown. Weak recovery
  • UAUA Fell too far in big volume. Weak recovery day in weak volume
  • SLAB Crashed and burned worse than UAUA
  • MSPD Barely survives the cut. Big volume fall & weak volume recovery yesterday. But still above 50 DMA – Wait.

Analysis-

  • The McClellan Oscillator is at -65 = oversold = Buy.
  • The BDI has broken out of its pattern to a new high (see above) This is especially good for China & Brazil stocks. = Bullish

Unforeseen events are impossible to predict, but this is decent time to keep buying the dip.

Hopefully these are long term holds – Sold 1/2 of the IMAX bought Friday for a 9 10% gain. IMAX now 4% or portfolio position & ESRX 3% position, VCI 1%  .

Danger point – If we loose over 1/2 the gains

Added 5% position in UWM at 33.35 yesterday. Placed 5 to 7% stop loss. FXI & EWZ again look like decent buys on dips because of BDI.

Plan to add some more from above ETF’s and YOUR stock list on dips today.

If benchmark S&P 500 rises above its 50 DMA Long Term Outlook changes back to CAUTIOUSLY BULLISH. We’re close.

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

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