Taking a long needed break

I have been absent from Blogging the past month or two and have decided I need a break, since I have been at this for over 6 years. I am not going to be posting on a regular basis, but will post when something gets my attention and/or bothers me. For now let me say that I very much appreciate your visiting my site over all these years. This week I attained a milestone of 80,000 visitors since I started. Those visitors read some 130,000 page views. So again thanks. Don't forget to vote in the min-poll to the right as we are all concerned about the countries solution for its debt problem.

Political campaign for President and lack of "civility." UPDATE Feb. 18

Many in the media have said that the 2012 Presidential election campaign was shaping up to be a clash between the 99% and the 1% or Class warfare. While that surely seems to resonate with many of us who write Blogs, I would offer a more sinister look into the 2012 campaign. It looks to me like it is a reenactment of the Civil War. I would suggest to you that the plain hatred for this President and the insistence that he be a "one term President" is racially motivated and the reason why Newt Gingrich won South Carolina and why Mitt Romney won New Hampshire. To me if you peel back this onion, the presidential race seems to be about reliving the "Civil War" in the political arena. Look at the arguments on both sides of the issues. If you frame them through the prism of "Civil Rights", you can easily make the leap to that argument. That is why the "Birther" conspiracy took hold for so long. Being "civil" means being courteous or polite. And the sad truth is that there is nothing "Civil" about this election campaign season.

It is going to get much worse I fear, before this election campaign is over. Notice the language of Newt when he talks about President Obama being the "Food Stamp" president. Yes, there are many on Food Stamps today, but not just minorities are getting them. Mostly white Americans receive them today. But the racial undertones are there and the dog whistle call to the far Right gets the applause lines from the far Right. For one brief moment yesterday the Congress was able to put this war behind them and join in a tribute to Rep. Gabby Giffords of Arizona in her struggle to survive a gunshot wound to the head last year. She has given up her Congressional seat so she can focus on her rehabilitation. That's smart. A small glimpse of sanity in an otherwise anger filled political season.

UPDATE Feb. 18th
Last night on the show Real Time with Bill Maher, Bill closed his New Rules segment commenting on the disrespect of President Obama, in an affront to the first Black President that seems to be based on racism. I totally agree with his views and want to say here I really valued his persistent reference to how this President has been disrespected from the very beginning of his Presidency, unlike the treatment of any other President in history. Thanks Bill!

January 17, 2012 Dow analysis

I have been asked where do I stand since my last post, since I hadn't written anything for 10 days here. Well, the reason I haven't posted was because nothing has really changed for me to comment on. So what I have done is to put a 1 year chart up of the Dow and you can see we still have not broken above this line to have a breakout. We get closer but no real conviction. Here's the chart below:

If and when we do have a clearer picture of where we might be headed I will post something to that effect. But we could be in this never land for a while as Europe tries to straighten itself out from their Sovereign debt crisis. Greece is on the brink of succumbing to default any time now.

Where is the Dow heading?

Today we look at the Dow over a period of 2 to 5 years to get a sense where we are and what we must consider as we try and manage our investments. We are at a critical point where we are either going to have a breakout to the upside or we will have a breakdown to the down side as illustrated in the charts below. First let's look at the 2 year chart for looking at the current top of resistance. It is that highest blue horizontal line.
In the chart above, the bottom red line marks a short term support line. Breaking below this line doesn't mean we have a significant breakdown, but it does mean we need to be careful. In the 5 year chart below, you will see where the next real support line is and this one we must stay above or we may go down and retest the lows again.

Much going on this week in Europe and while we begin Earnings season with Alcoa reporting its earnings, Europe may take center stage over any news here.

Job creation ain't what it used to be!

With today's employment data release, I thought a trip down memory lane might be informative. My focus today is NAFTA, the North America Free Trade Act, and the Presidential run of Ross Perot in 1996. First, below is a chart posted by Chart of the Day which shows Non Farm Payroll job gains, by decade, from the 1940's. Here's the chart below:

What is significant from this chart is what has happened the past decade of the 2000's. Basically, no jobs were created. In fact jobs were lost during the Bush Presidency. Jobs have been created the past several years, but no where need the number required to sustain a good economy with low unemployment.



Now we bring in Ross Perot. If you remember when Ross Perot ran for President, he warned us all about NAFTA not being good for America. In fact, his famous quote from the Presidential campaign became, "If NAFTA passes you will hear a giant sucking sound of jobs leaving America. In 1994, NAFTA became law. I think Ross Perot has been proven to be correct after all!

2011 market investments and learnings from ETF instruments

2011 was the first year I was really invested in ETF's. I learned a lot about them but the lessons took too long to get. But there were major learnings. It is a well known fact that they were designed to be used for short periods of time and not to just buy and hold like traditional stocks. However that is easier said than acted upon, especially if you bought some and the market moved in the opposite direction you had expected.

Let me give you an example using the Russell 2000 index, symbol RUT, and comparing it versus the ETF's which represent the Index, TNA, the 3x Ultra Pro ETF and TZA, the -3x Short ETF. This means that on a given day where the Russell moves up 1%, TNA should move up about 3% while TZA should be down 3% on the same day. This is all well and good in practice of a given day, but if you do not sell on that given day and lock in your profit while looking for more the next day and possibly the next day after that, then you will be surprised at the cumulative effect that will have on your portfolio.

For 2011, the Russell 2000 has lost 5%. One would expect the following. TNA should be then down 15% and TZA should be up 15%, but that's not what really happens. Let's see what you would guess the numbers should be before I reveal them? Take a guess! Well the chart below is a chart of the Russell and TZA, which one would have thought would be up 15% for the year. Here's the chart:

Now let's look at what you would have expected for TNA versus what actually occurs. In the chart below I have the Russell plotted against TNA.

The 3rd chart is a plot of only TNA versus TZA for the 1 year period.

It took me a while to realize I needed to trade these ETF;s when I made any good profits and get over trying to get back to my average purchase price, but when I did I actually made some good moves thanks to the volatility of the market during the year. My best advice is don't buy and hold these or other ETF's for long periods of time or you will eventually lose your money. I suspect many others don't understand these ETF's and it has been a painful lesson to learn. I hope these charts make it very clear and that the smae mistake is not repeated in 2012.

So what time duration seems to correlate closely or to say it another way, how long should you keep these ETF's. Here is a chart below of only 3 months comparing the Russell, symbol RUT, to TNA. During the last 3 months, RUT gained 16% and one would expect that TNA should be up 3x that amount or 48%. Well in fact, TNA gained only 39% as is seen in this chart below. So you will lose even in short a time as 3 months. Here's the chart:

The next chart is of the RUT versus TZA for the same past 3 month time period. As you might expect with a 16% gain of RUT that it would create a loss of 48% of TZA. Well as you can see the loss was greater than 48%. The loss was in fact 52%.

In summary, even a 3 month time period will cost you bigger losses or less gains than you might have come to expect. The shorter the timeframe the better the correlation.

Kim Jong Il funeral celebration

North Korea to Celebrate Kim Jong Il at Funeral. The ceremony will likely mobilize hundreds of thousands of weeping participants in a display of national mourning that’s designed to portray broad public support for the regime, according to analysts.

Year End summary of German DAX Index

To complement the charts I posted yesterday, I thought I would add the German DAX index over a longer history than I had before. As you can see from the chart below, this Index also has a Head and Shoulder Pattern which dominates its 40 year history.

Now Head and Shoulder patterns do not mean that this market will necessarily drop from here, but here is the definition for that pattern from Investopedia:

"The head-and-shoulders pattern is one of the most popular and reliable chart patterns in technical analysis. And as one might imagine from the name, the pattern looks like a head with two shoulders.

Head and shoulders is a reversal pattern that, when formed, signals the security is likely to move against the previous trend. There are two versions of the head-and-shoulders pattern. The head-and-shoulders top is a signal that a security's price is set to fall, once the pattern is complete, and is usually formed at the peak of an upward trend. The second version, the head-and-shoulders bottom (also known as inverse head and shoulders), signals that a security's price is set to rise and usually forms during a downward trend.

Both of these head and shoulders have a similar construction in that there are four main parts to the head-and-shoulder chart pattern: two shoulders, a head and a neckline. The patterns are confirmed when the neckline is broken, after the formation of the second shoulder.

The head and shoulders are sets of peaks and troughs. The neckline is a level of support or resistance. The head and shoulders pattern is based on Dow Theory's peak-and-trough analysis. An upward trend, for example, is seen as a period of successive rising peaks and rising troughs. A downward trend, on the other hand, is a period of falling peaks and troughs. The head-and-shoulders pattern illustrates a weakening in a trend where there is deterioration in the peaks and troughs.

Head and Shoulders Top

Again, the head-and-shoulders top signals to chart users that a security's price is likely to make a downward move, especially after it breaks below the neckline of the pattern. Due to this pattern forming mostly at the peaks of upward trends, it is considered to be a trend-reversal pattern, as the security heads down after the pattern's completion.

This pattern has four main steps for it to complete itself and signal the reversal. The first step is the formation of the left shoulder, which is formed when the security reaches a new high and retraces to a new low. The second step is the formation of the head, which occurs when the security reaches a higher high, then retraces back near the low formed in the left shoulder. The third step is the formation of the right shoulder, which is formed with a high that is lower than the high formed in the head but is again followed by a retracement back to the low of the left shoulder. The pattern is complete once the price falls below the neckline, which is a support line formed at the level of the lows reached at each of the three retracements mentioned above."

I hope this lengthly definition helps you analyze the charts yourself. For additional information on chart patterns, I find the book "Technical Analysis Explained" quite useful

Year end summary of the Dow and stock market trends

This is my year end summary of the stock markets for the year and where I think what might occur in 2012. My first chart below is of thew Dow for the past 10 years on a monthly basis. As you can see below, for 2011 the Dow managed to stay between 11,000 and 12,800. Looking at the big drop in 2009, where we went all the way down to 7,000 on a monthly basis and 6440 as a low daily close.

It is interesting to notice the Volume chart for the Dow. We averaged about 600 Billion shares a month from 2002 to mid 2009. Since then we have had a significant drop to 380 Billion shares. So the rise from 7,000 was built on significantly less volume than the rise from 2002 to 2009, which was a Bull market rally. It looks to me that since 2009 we have been in a Bear Market rally, as the volume has been too low for a true Bull rally.

The key to watch on this Dow chart are the 2 red lines. We will need a breakout either to the upside or to the downside to determine longer term trends from this chart alone. However, looking at the Dow 25 year monthly chart, we get more clarity, as seen below.

I do still expect a drop below current levels during 2012. The Head and Shoulder patters or "W" pattern as I call it does point to lower lows going forward and limited upside potential.

Given the chart readings, the next thing to do is see if world events suggest a more optimistic or pessimistic view for 2012. We have a Presidential year election in November 2012 and we have had gridlock in the Congress in 2011. I don't see the gridlock easing and many issues including our own debt which must be dealt with as well as continually funding the government. The Unemployment scene isn't going to get much better because we have structural unemployment which will be around for a long time unless somehow we retrain workers in new skills to meet a more technological demand than typical blue collar workers have brought to the work environment. We also have the Supreme Court making a decision on President Obama's Health care bill legislation as to whether it is Constitutional or not.

Then we have the Sovereign Debt issues in Europe, the Arab Spring and new leadership in North Korea, a test of the government of Iraq to function without our military presence and then there is Iran's pursuit of Nuclear weapons. The Euro is in crisis and Russians are challenging Putin's grasp of the presidency there. And last but not least, we have all those who believe the world will end on Dec 21st 2012 because of the Mayan predictions.

Let's conclude with the fact that 2012 will have many volatility swings ands most likely testing the previous extremes of those swings. It is a year to be cautious with your financial assets. My belief is that we humans will do almost anything to avoid pain rather than to risk succeeding. Therefore, I believe it is wiser to be on that side of the investment strategy by being short from time to time. It is also wise to take profits sooner rather than being greedy and waiting for more profit before selling.

Good luck this coming year. Thanks for taking the time to visit my Blog. This new year marks 7 years of my blogging. I have had 79,000 visitors to my site in that period. Happy New Year!

Ever wonder why we promote the weirdest, zaniest candidates for President? The answer!

As we end 2011 and begin 2012, an election year for our President, have you ever wondered how this country ever elected someone like President George W. Bush or looked to Michelle Bachman, Herman Cain, Rick Perry or Newt Gingrich to be President. Have you ever wondered what's wrong with voters that they could be that stupid, or "tupid" as one of my best friends jokingly says? Well I found the answer to those questions right here. Play this video and you'll never wonder again why we pick who we pick for President and answer a whole bunch of questions about who we are as a people. Besides you will laugh too!


Now you know! Merry Christmas and Happy New Year to you and yours and let's all pray for a smarter electorate as well. For those who don't know what the word "electorate" means, you might consider staying home this Presidential election. Only kidding! :)

Market comments for the coming week of Christmas

Oh I hate to be so repetitive. As I said in my last post on Dec. 5th, "I thought it was time to post on the stock market again." The main points to make this week are that all Indexes are now below their 200 day Moving average line, shown faintly with the yellow lines on each chart below. My opinion continues that this shows the tendency is still to remain below the 200 day Moving Averages in the intermediate timeframe. While there was "hope" the Eurozone had "solved" its crisis we all know better now, don't we. Unfortunately it will take a stock market crash or a sovereign debt meltdown causing a market crash before Europe is forced to come to terms with its problems. Here are the updated charts of our major indexes.

Market comments for the coming week of Dec. 5th.

I thought it was time to post on the stock market again. The main points to make this week are that all Indexes, except the Dow, are still below their 200 day Moving average line, shown faintly with the yellow lines on each chart below. The second point is that while the Dow remains above the downward sloping red line, the Russell has remained below it the most. The Dow is most likely the most manipulated Index and the Russell the least. My opinion is that this shows the tendency is still to remain below these red lines in the intermediate timeframe.




This week will have its important announcements. The biggest news item will be the European meeting, scheduled on Dec. 8th and 9th, of Finance ministers to discuss resolving the Sovereign debt issues of Greece, Italy, Spain, Portugal and others. This will be the most important meeting of the last year as it is the first since the coordinated Central Bank intervention to lower the rates banks pay to increase reserves. The Central Banks took this action because there was an immediate concern of a large bank failure in Europe. Our markets will react to what happens there, not here.

The Fed and its $7.7 Trillion secret bailout to banks

This story is something that should spread like wild fire across this country so that every American understands what the Fed really did to bail out the banks with $7.7 Trillion in taxpayer money in secret. The Congress didn't know nor did many officials in government!

Click here for the Bloomberg article exposing the Fed.

Get everyone of your contacts to read this article. The 99% now have plenty of ammunition to keep their movement going. Ron Paul was right that the Fed needed to be audited and eliminated.

Ideas for the 99% Occupy movement. Idea #2

Ok, here's something else that we could demand. How about every law that Congress passes also applies to Congress as well. That would eliminate the Insider trading scam Congressmen and Congresswomen portray on its citizens. It would also require Congress to have the same health Ins. plan that we all have. That would help eliminate the unbelievably lavish retirement benefits they get.

Are you for this too?

Ideas for the 99% Occupy movement. Idea #1

Many have been asking what are the demands of the 99% movement protesters across the country and much has been made about the lack of a coherent message. I believe since most of us are in the 99% we must offer suggestions for what we all can do.

So here is my first suggestion. Most of us are concerned about the "Too Big to Fail" banks here in the US. There are about 6 of these institutions and here are the list of the ones I remember:

JP Morgan Chase
Bank of America
Citicorp
HSBC
Wells Fargo

Anyone who is concerned these banks are too big can withdraw all their money and put them in local banks and Credit Unions. I like Community banks myself because they loan to local merchants. If the 99% withdrew their support of these banks they would be forced into shrinking and the size of their assets would shrink dramatically.

Idea #2 is in the works. If you have any ideas, feel free to leave a comment and maybe yours will be posted.

Where are the Student Protests today? Vol. 2

It was May 21st, 2005 when I wrote a Blog post titled, "Where are the Student Protests Today?". It has taken this long before some have finally demonstrated. This is the 99% Occupy Wall Street movement. Here is what I wrote back in 2005:

"As we approach June 4th , the anniversary of Tiananmen Square, and I reflect on our own history of student protests, it got me to wonder where are today's student protesters, as certainly there are many disturbing trends in America today, threatening the very fabric of our democracy as we search for bipartisanship in Congress and a more humble America in our rhetoric abroad and at home. But we still seem very arrogant as a nation with little understanding of the very cultures we are trying to change. I am not talking about Iraq here. I am talking about the "Divided" States of America, that's right, the good ole D.S.A., one nation, (partly) under God, very divisible, with liberty (until we can change those Senate Rules), and justice for (a few).

There was once a time of idealism, of standing up and being taken seriously by society, a conscience for all of us. This was the time of Student protests. Students protested the Vietnam war, the May 4th, 1970 Kent State shootings, Tiananmen Square and support for democracy in China, the outrage at the Chinese Government’s reaction to the protests and some recent protests of the Iraq war in selective cities.

As a nation, we have a lot to be angry about with our government. First there was the misleading 'intelligence' of the lead up to the Iraq invasion and then the letters of former White House General Counsel and current Attorney General, Roberto Gonzales, regarding new interpretations of what is and what is not torture. Then the pronouncements by our President that certain prisoners would not necessarily be treated in a manner consistent with the Geneva Convention. Add to this more recent assertion about additional abuse in Guantanamo and the shameless deceit to get recruits on High School campuses to enlist, and you wonder what it takes to get Student protesters engaged again. There have been some protests of the Iraq war but they fade away quickly. What captures the focus and attention of the bulk of our students today? Could it be survival, as the job market still looks bleak? Or is it just apathy? What do you think? I don’t think they care much about what the Senate is proposing in its Nuclear Option to end the filibuster and allow judicial nominations through who by the minority see as extreme in their views. Stay tuned."

I think this has merit today as well. Those brave students at UC Davis who were pepper sprayed for no reason other than they were protesting. Others on Wall Street protest as they have seen what they have gained over their lifetimes gone because of the greed on Wall Street and the Banks. Let's be thankful that the conscience of some is alive and full this Thanksgiving, even though their stomachs may be empty. Bless the 99% and be thankful for their voice and their courage. They are the best of what has made America great. Back in 2005, way before the Sub Prime problem, there was a jobs crisis (during the Bush years), but many have forgotten that. Many ill informed have blamed President Obama. Not me.

Along with your dinner today, which is a blessing in itself, maybe this will give you some extra food for thought.

Market comments for Nov. 23rd, 2011

I have not posted much recently on the stock market because nothing much has changed. I have posted the chart I posted back 1 month ago, on Oct 23rd, with an update based on today's current level of the S&P 500.

Now below is today's chart as of 11:15am PST. As you can see we have gone back below the upper red line and I see that both moves above that red line were nothing but Bear traps. Bad News in Europe and the failure of our Congressional Super Committee to agree on debt reduction, has the stock markets declining world wide.

I am still on the short side of this market and prefer to be that way going into this weekend. But I also believe we are a bit oversold and so a rally may occur after the weekend.

Market comments for Nov. 18th, 2011

Today is Options Expiration for November so you should see high volume both at the opening of thew market today and also at the close. Troubles today in the Eurozone seem to be taking place behind close doors rather than in the press, so the Futures markets are up some as we go into the open. The economic data this week was somewhat better than expected with Initial Jobless Claims at 388K for the first time this low in a long time. Housing starts were also higher than expected. All good signs of a slightly better economy in the US with the emphasis on the word "slightly."

We have broken below that key support level of 1220 on the S&P 500 closing at 1216, but today we may go back above it.

Merkel and Sarkozy clash

There is a fight going on between Merkel of Germany and Sarkozy of France over whether to allow the ECB to, in essence, print more money like we have done here. Sarkozy would like it to get out of the Euro sovereign debt crisis and Merkel would not like that solution. Here's a picture below of the two of them. Which do you see winning the argument strictly based upon body language.

To read the article which goes with the above picture, click here.

An update and analysis of the S&P 500 chart

Back on Oct. 23rd I posted this chart and commentary about the S&P 500 and where it might be headed. I think a review of that post seems appropriate as not much has changed since then. Let's see the chart and here's what I wrote then.

"I have drawn 2 red lines and 1 blue line. As you can see with the red line labeled 1, that we have broken above this level this past week. The next challenge for the Bulls is to cross over the red line 2 which crosses the axis at 1240. If it crosses above 1240, then the obvious next resistance level is at 1265. The S&P 500 closed Friday at 1238. I can't guarantee that we won't go up to test the 1265 level, so you might want to entertain the possibility, depending on the news coming out of Europe, we could surge up this week and test it. If the news is mixed from Europe, we may stay between that narrow wedge between both red lines, between 1220 and 1240. But there will be a breakout soon in one direction or the other."

At this hour today, the S&P 500 is at 1246 and the chart has been updated below. Again, not much has changed. We are still below the 200 day Moving average and that line is slanting down.

Stock market: Where are we going?

I thought it would be worthwhile to look at this past week and see where we ended up. In my last Blog post, I cited the fact that the 200 day Moving averages appeared to be a significant resistance level for all major indexes. This week proved that point again as we ended the week with only the Dow above the 200 day MA. The S&P 500, the Nasdaq and the Russell 2000 all are still below their 200 day Moving averages. Until we can climb above these indexes we are stuck from going higher.

The Put to call ratio closed the week at 0.93, not exactly a buy signal. The sovereign debt issues in Greece and in Italy took center stage in the early part of the week. Then the resignation of Greece's Prime Minister and the signal that Berlusconi of Italy may resign next. ALL THESE MOVES CLOUD THE FACT THAT THE DEBT ISSUES AND AUSTERITY MEASURES NEEDED TO RESOLVE THEM HAVE YET TO BE IMPLEMENTED. Stay tuned as the volatility will continue for the next 6 months. Even if austerity measures are passed by the governments, the people will be heard on these matters in ways that will frighten many. The people have only begun to make their objections known to the world and their leaders. In true democracies, leaders can be voted out or feel enough pressure to resign. This crisis is just in its infancy.

Don't forget that there are now only 11 days left before our Super Committee must agree to cuts in spending or automatic cuts in the military will be implemented. My guess is they won't do what's necessary and the US will be downgraded again by the S&P and Moody's rating agencies.

Here are the charts promised earlier: