Thursday, April 30, 2009

Market Outlook for May 1st and beyond

Friends and visitors, I wrote a note to a close friend tonight and thought I should post this here about my view of the market today and what I expect in the next week or so. Here's what I told him.

"I have been watching the Put to Call ratio and it has been relatively low which means higher probability of correction than a market advance. It closed today at 0.85 and opened at 0.65. I put a chart on the Blog on April 18th showing the recent year and a half range and when the number approaches the low of the range it is a sell signal and if it is at the top it is a buy signal.

So best to just sit and be as patient as one can right now, until we get a clear signal. The Volume today was a little ahead of yesterday and the market closed down, not up. When volume increases and the price drops, it is a >u>bearish sign. One other thing. I have been tracking Insider Trading and I can tell you as fact, Insiders are selling more than buying, and the amount of cash raised by selling is much more significant a Dollar amount. It has been that way since the market dropped last Fall and nothing has changed that. If Insiders saw a better picture of the economy going forward, they would be buying, not selling."

As I wrote in the previous post, the Stress Test results for the 19 largest banks are not going to be released until the end of May. Banks are most likely under capitalized as we have heard this past week by as much as $1 Trillion. These bank assets need to be dealt with by either creating good vs bad banks or something like Chapter 11 bankruptcy to wipe out shareholders, instead of using more government money. But then we are back to a lack of confidence in the banking system, a possible run on the banks or complete collapse of the banking system and President Obama isn't going to allow that to happen while he is in charge. Toxic assets are still on the books and no lipstick is going to make that Pig look any better and that is the problem!

Speaking of Swine Flu, it seems to me that current technological advances in communications using the internet, cell phones and television, has allowed healthcare officials to get a very quick handle on this outbreak, which has the effect of minimizing its affect on humanity. Contrast that to 1918, where it took weeks and months to realize what was going on and to mobilize precautionary measures for use by the public. It was too late then and I lost my Mom's parent during that period, but now, everyone in the world knows to wash their hands frequently, cover their mouths when coughing and avoid large gatherings or enclosed spaces. VP Joe Biden got himself into trouble today, for saying what everyone knows was the truth. There is something very refreshing about having a VP that is wired to just say the truth and can't help himself. You got to love him!

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Stress test results on Banks delayed! UPDATE

News just out tonight. A small excerpt of the story follows:

"U.S. Bank Test Results Delayed as Conclusions Debated

By Craig Torres and Robert Schmidt

April 30 (Bloomberg) -- The Federal Reserve will postpone the release of stress tests on the biggest U.S. banks while executives debate preliminary findings with examiners, according to government and industry officials.

The results, originally scheduled for publication on May 4, now may not be revealed until toward the end of next week, said the people, who declined to be identified. A new release date may be announced as soon as tomorrow, they said.

Regulators and bank executives are concerned about how the disclosure is handled because weaker institutions could suffer a collapse in their stock prices."

The impact on this news on the Bank Indexes of the stock market are unknown at this time. However it may be very good news for those like myself holding the ETF Short of the Financials, a triple play, symbol FAZ. Since this ETF shorts the Financials it may get a real boost tomorrow as some bank big stops drop. The market does not like uncertainty. If they wait a whole month to release the results this is not very good for banks and shareholders. Remember, the idea of the stress tests, according to Treasury Secretary, Tim Geithner, was to bring confidence to the markets and specifically the banks. FAZ closed today at $8.31/share and I purchased it last week at $8.50/share. The market may also shrug off the news and banks could rally as it delays any news. Let's see the market's reaction tomorrow, May 1st. Many markets abroad will be closed tomorrow, as it is May Day.

UPDATE: May 1st 8:20am PST

Here's the latest news on this from Bloomberg News:

Regulators Said to Plan Stress-Test Disclosures on May 7

By Craig Torres

May 1 (Bloomberg) -- The Federal Reserve and U.S. banking regulators will reveal the results of the tests on the country’s 19 largest banks on May 7 after financial markets close, according to a government official.

The government will unveil both aggregate information and firm-specific details about the capital buffer required to absorb losses if the recession worsens, the official said on condition of anonymity.

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Wednesday, April 29, 2009

Market summary of today's action, April 29th

The question for the day, Did we have a significant breakout today to the upside? Well, it depends on the what definition you use to the meaning of the word "significant". Again the move was at one time up over 200 points on the Dow. It closed up an amazing 166 points on a day when GDP for the first quarter was announced as down 6.1%. There was other bad news in other metrics but laid on top of all this data was the concern over the Swine Flu. It wasn't until after the market closed that WHO (World Health Organization) raised their alert now to a 5 out of a possible 6. How this will affect markets worldwide tomorrow is uncertain. The major disappointment if there is one today, is that the Volume continues to be very low and not convincing of the true nature of this rally. I lost money on paper today on both TZA and FAZ, but they were offset by gains in other stocks. The Put to Call ratio hit a low during the first hour or so of 0.67 but closed at 0.75 and while it is not as low as it has been it is setting up a sell signal, if we continue this decline in the ratio. Tomorrow is the last day of the month of April and so the month appears to be ending fairly decently on the indexes.

I know it is frustrating to be waiting for a pull back and not get one, so I feel your pain. Do what's best for you. I need some strong signal to change my mind and I haven't gotten it yet. So I am staying pat unless during the days something says to change my mind. I will post as quickly as I can, if I do.

Don't forget to take the Mini Poll on the right margin about how long the recession will last. Only vote once per month. Tomorrow will be the last day of this month's data accumulation and on Friday I will post the summary compared to past months. Thanks for coming by and feel free to leave a comment on your views of the market or anything else for that matter.

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Market news and outlook April 29th

Major data was released this morning on GDP. For the first Quarter GDP was down 6.1% and this is the 3rd consecutive quarter of negative GDP. Exports for Q1 were down 30%, the lowest since 1969, while Imports were down 34%. Consumer Spending increased 2.2%. Inventories declined 2.7%. Home Investments showed a 38% decline and Business Investment in Structures was down 44.2%.

In Pre-market the news seems to be shrugged off, as Futures are still positive with the Dow up 71. Watch the market carefully today, as we may have the breakout many of us have expected. I happen to think it has a higher probability of dropping than going up, but I am right only about 67% of the time. To me the news is very bad and I don't see why the market is still up. It was significantly less than the -4% GDP expected.

I asked myself if I have changed my spending patterns recently since the scary market decline and I would have to admit only slightly. I still go out to local restaurants, but since I don't need any new equipment or appliances, I am not really spending much.

The Swine Flu seems to be growing at a relatively slow pace, which is good. The first U.S. death was reported in Texas today of a 23 month old toddler. Hopefully this scare will dissipate and the concern lessoned. We don't need this crisis on top of all the crisis we still face. The large Banks are still very much in trouble and the release of the Stress Tests on the top 19 Banks will be announced on Monday. So the market seems to be waiting, apparently frozen at current levels. Today is also President Obama's 100th day in office and the general tone from that should be good with him garnishing a 69% approval rating.

BANK OF AMERICA HOLDS THEIR SHAREHOLDERS MEETING TODAY AND THE VOTE TO KEEP THE CEO KEN LEWIS WILL MAKE NEWS EITHER WAY. Many expect him to be outed by angry shareholders. Quite honestly if he is outed as CEO it is difficult to predict the market's reaction on Citi stock but I have bet that Banks share prices will drop going forward so we shall see what this meeting does today, to that end.

I remain pessimistic regarding a market advance. I believe this rally has been a Bear Market Rally and not the beginning of a new Bull Market. There is an emerging Commercial Real Estate crisis added to the home foreclosure problem still front and center, with each additional layoff contributing to more foreclosures in the system. Next week April Unemployment numbers will be released which will heighten the concern. Layoffs are still in the mind of Executive decision makers in many if not all businesses. This is not a good sign. Preserve Capital until the picture of the future shows more promise.

Don't forget to vote in the Mini Poll on how long the recession will last on the right margin. Vote only once per month. data will be summarized next week.

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Monday, April 27, 2009

Stock Market strategy update

This morning I purchased shares of the ETF Financial Bear Triple, symbol FAZ, as I see the Banks going through more volatility to the downside over the coming week or so. The outbreak of the Swine Flu reports over the weekend have put a damper on the market and so it continues in the recent tight range. We are all waiting for a breakout in one direction or another and the longer this goes on, the more pent up demand for a larger swing. It is my belief this will be to the downside and it may take waiting till next week when they report on the Stress Test results for each of the 19 Banks tested.

I have said before and accentuate again today, I believe it is in everyone's interest to preserve capital until the economic and financial picture looks more certain. So far so good. Time will tell if this was a wise choice. I continue owning my TZA shares.

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Sunday, April 26, 2009

The Torture memos were released this week. Where were the critics then?

This week, President Obama released the secret memos from the Bush Administration redefining torture as "enhanced interrogation techniques" and authorizing these techniques to be used by the CIA and others. On March 18, 2006 I took the unusual step to call out President Bush, Vice President Cheney and Sec. of Defense Donald Rumsfeld on this Blog. With the news this past week coming out about the memos authorizing Torture during the Bush Administration, I thought I would republish here that first post. It was during this time where the media was too silent about this and the Republicans were still in charge of the Senate. Here's what I wrote back then:

Dare I write the unspeakable here. I have been very troubled lately by the actions of the President, Vice President and Secretary of Defense, Donald Rumsfeld. Here's what has been bouncing around the infinite space of my tiny brain.

The flashbacks of the early days of this Presidency, where the arrogance of President Bush and Vice President Cheney seemed to be our only problems and those were just personality disorders. Then came 911 and the President and the Nation came together along with the sympathies of the rest of the world. We were one then and anyone half alive could feel it. The outpouring of support by both friend and foe alike to help on this new War on Terror was remarkable, reassuring of mankind itself and comforting that we wouldn't be alone in this pursuit. Then the switches of manipulation, arrogance and anger swept the idealogues to consider using this event to go forth with their master plan to repay Saddam and correct the perceived errors made by the former Bush Administration and George W.'s father. People like former Secretary of the Treasury, Paul O'Neil, was the first to shed some light on this in his interviews and later in his book. Rumors were everywhere about Colin Powell and how he was at odds with the Administration and portrayed as a weakling. Powell never abandoned his boss, the President, in public and was a good soldier externally but we all knew something wasn't right in the White House and with this Administration.

Then came the use of language trickery to confuse the American public to believe that Iraq was somehow connected to 911, the resistance to go along with the creation of a special 911 Commission, the abandonment of enforcing Environmental laws, the abandonment of the Kyoto Treaty early in the Administration and the resignation of former NJ Gov., Todd Whitman, as head of the EPA. Then the resignation of Paul O'Neil, all while the intelligence was being cherry picked to justify going into Iraq. We were being drawn in methodically by the silencing of any voices of dissent left within the Administration. The press let us down too, as they were afraid of Bush and Cheney and the power they saw amassed after 911 through fear and intimidation.

Then the refusal by this Administration to abide by International laws citing our right for pre-emptive strikes against anyone at anytime of our choosing. Refusal to allow anyone connected to the invasion of Iraq to fall under any jurisdiction of the World Court and International laws. Then General Counsel Alberto Gonzalles endorses the idea that somehow we had a right to torture in this unconventional War on Terror, which now was being blended into the war in Iraq. Later came Abu Ghraib prison pictures and assurances that we weren't torturing even though it was obvious to all of us that this had been well planned out within the Dept of Defense and authorized by both the Vice President and President under the new interpretation of the law on treating prisoners.

So where am I going with all this. Put aside for a moment the abuse of power by these individuals within the borders of our country. These are such things as Wire-Tapping without the authority of the FISA Court, the incompetence of this Administration in handling the Katrina tragedy, the refusal to protect our Borders from illegal aliens, the leaking of the name of a CIA operative by VP Cheney for the purpose of silencing a critic. These are enough (and I have more if you like) to impeach both President Bush and Vice President Cheney but there is more we should do as their crimes are against humanity. (Now here comes the unspeakable part.)

As a country, when all of this is over and they have left power, dare we consider turning them and Rumsfeld over to the International Court at the Hague to stand trial for War Crimes. One could make a legitimate case that it is warranted for the seriousness of their crimes. Of course we would never do this nor should we. But it is worth considering what they have done in the world from the perspective of a person not living in the USA. Someone from a country that is not Iraq nor Afghanistan. How must Europeans look at us? How about Japanese, Chinese, Australians? As a people, WeThePeople need to be willing to look at issues from a different perspective. It is very difficult to do when it is the water we drink every day and the air we breathe from our media and this Administrations manipulation of the truth. We are no better than any other human on this planet but we have been blessed to have been lucky enough to have been born here. We have had our chance to help save lives in the Darfur region of Sudan. Seems like we would prefer to kill people than save people as a country sometimes. When are we going to realize that and rejoin humanity? I'll tell you when, when you wake up and speak out, especially when you are afraid to! We were all one after 911. We squandered the good will of the world. It will take decades to regain it, if we are lucky to live that long.

I felt like a lone voice back then but looking back it was the first of several difficult topics to raise and be criticized for publishing. Looking back I am glad I did. Another one I wrote was titled, "April 22, 2006 High Crimes and Misdemeanors- Bush/Cheney?" and also this one titled, "June 6, 2006 The Geneva Convention - Are we above that Law?

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Saturday, April 25, 2009

Market weekly summary and outlook for week of April 27, 2009

Market is now flat from where it was 2 weeks ago, on April 9th. The Dow closed yesterday at 8,076. Two weeks ago it closed at 8,083. The Nasdaq closed yesterday at 1,694. Two weeks ago it closed at 1,652. The S&P500 closed yesterday at 866. Two weeks ago it closed at 856. So while there looks like we have a trend up, in fact, the market has stayed in a very tight range for the 2 weeks.

The Put to call Index closed yesterday at 0.91 where 2 weeks ago it closed at 0.81. The VIX Index closed yesterday at 36.82 while 2 weeks ago it closed at 36.53. I would say that those are pretty close too.

Gold closed yesterday at $914/ounce and 2 weeks ago it closed at $890/ounce. This is a 2.7% gain. The Dow didn't gain anything, the S&P500 gained only 1.2% and the Nasdaq gained 2.5%. Technology did the best in the markets, but not as good as did Gold. I have said to watch Gold prices to get a best sense of direction of the market. If Gold goes up, the markets will drop and if Gold drops the market should go up. I think there is a trend building for Gold's continued rise, going forward.

All this while we learned the earnings of a number of companies, the metrics used as a basis of the stress tests for the Banks. The results so far suggest Banks may need to raise another $1 Trillion of Capital. There was also the release of the memos on Torture by President Obama this week, which by the way was a good decision and a necessary step in moving ahead with this mess. And we passed the April 15th deadline for paying our taxes, the retirement accounts are flush with new cash all looking for a new home to invest in. It might be a part of the reason the market did not pull back much, as there were buyers at every moment the market did. Eventually we will have a breakout to the up or downside.

So I am still of the same mindset: We have been testing the upper bounds of this range now for several weeks and unable to get above it. Only time will give us the answer. I am staying with my ETF Ultra Short, TZA, as, until we know for sure the direction, it is still a better possible rate of return than other investments I see right now and it does hedge against a significant market drop. Preserving cash and capital is what should be your priority. Much uncertainty ahead. This is a marathon not a sprint. And of special note is that it has been observed and reported that Insiders have been selling into this rally. For more on this click here.

Right now I am pleased where my own portfolio is and I want to protect gains I have made, hence the ETF Ultra Short, TZA. You do what's right for you here. No one really knows what is going to happen but in another week we will learn how the market reacts to the actual results of the Stress Tests for the Banks. We will also be getting the results of the Unemployment rate for April on or about May 4th. So news will lead the markets and are unpredictable.

Don't forget to vote in my Mini Poll on the right if you haven't this month. Thanks for stopping by. Come again.

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Thursday, April 23, 2009

Markets are sending a clear message. Can you read it correctly?

That's correct, the markets are sending a clear message to us all if you are looking for the message. Today Gold went above $900/ounce to $907/ounce. Remember what I said about Gold leading the way. I said if Gold goes up the market will come down. That is happening. In addition the Put to Call ratio had dropped to 0.76 yesterday. And add to that Existing Home Sales for March were down lower than February, which actually were up for that month. And lastly, the earnings news has not been that bad and yet this market has not gone up. Did you ask yourself why? It would not make sense given all the bad news we have had before this on unemployment, Durable goods orders and other pieces of data. The reason all this makes sense to me is that the people who move the markets, Institutional Investors, see more systemic risk in the system than most everyone else is seeing right now that they are not yet willing to commit Capital to the market. A reality check on that viewpoint would be to look at the Volume. For a second week in a row, the Volume is declining each day with Monday having the larger Volume and then Tuesday is less than Monday's Volume and Wednesday is less than Tuesday's Volume. You have the picture. So this market will drift lower and lower, as this pattern continues.

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Wednesday, April 22, 2009

Predicting market direction: It's a lonely sport!

Just for the record, I bought more shares of TZA today at $31.30/share taking advantage of the move up today in the market. I was rewarded for this purchase so far, as the ETF, Ultra Short Triple play, TZA, closed at $33.65/share. The Dow closed at 7,887. The Put to Call closed at 0.78 and the VIX Index closed at 38.10, while Gold closed up today to $893/ounce. Where is the market headed? Why am I buying Shorts?

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Cheney's argument over use of torture has been used by many a villian

Yes, Cheney employs an old argument to justify torture. We have heard this many times before. He is upset that President Obama released the memos which Bush officials wrote to support their use of these "enhanced interrogation techniques". He wants other memos released, which show the benefits they got from using torture. Or to put it in its simplest terms, he says yes, we used those techniques, and are proud we did. Why? Because to Dick Cheney and his supporters, the ends justify the means! That is the same logic as terrorists use to explain why they do the acts they do. Are we no better?

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Tuesday, April 21, 2009

Where do we go from here in this market? You can guess, can't you?

Well the Dow rose 127 today and did get over 7.970 but not go over 8,000. Yesterday I said you would have a chance to buy TZA as it was not too late. So did you today? Or do you think the market is going up as the major direction going forward? Right now to me long term is only a couple of months at best. Too much uncertainty to predict with any authority. The best that can be done is short term "indicators" or as I like to call them, guesses.

Yes, you had a chance today to buy the Short ETF, TZA, or other short ETF's. I figure there is more downside risk right now than upside opportunity but we may just stay in a very narrow range and try everyone's patience. I was asked why the market has held up as it has.By the way, Volume was lower today than yesterday again.

The reason I see the market holding up, as it has, is the new money, which has gone into retirements most likely last week. It may be burning a whole in people's pockets and they want to invest it while there are still "bargains". That's what Warren Buffet thought when GE was $20/share. Now it's $11.70/share. You do what you think is best for you. If you Investment advisor has something to "sell" you on, ask a lot of questions before parting with your hard earned cash. Everyone is trying to use other people's money to make money, and that includes me. I'm doing it in the market itself and not trying to get something from my readers. So thanks for stopping by and please come again. Oh, and if you haven't taken that Mini poll on my right margin this month, please do. It will take less than 10 seconds. You have yourself a good day and remember what is really important in your life. Chances are you aren't spending as much time as you like on it. Maybe a readjustment is in order. All the best in correcting that situation.

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Monday, April 20, 2009

Market summary today Monday April 20th

Well you can't say I didn't tell you this was coming. The Dow was down today 290 points closing at 7,842 wiping out all the gains of last 2 weeks and all in just one day. The ETF, TZA, rose today 15% or almost $5/share to close at $37.70/share. I was announcing I was buying TZA on Monday April 13th and again on Thursday and Saturday. Some have asked me today, if it is too late to get back in. If your asking me now, why didn't you listen to me last week? It's a legitimate question. There are ways to get the answers you seek. Check my track record here. Go back and look at when I bought and sold. See what I have said TZA could go to and ask yourself if I would sell my shares now that the stock has risen? The answers of what I think will happen with this one has been documented.

Those who sold their Citigroup and MGM recently are most happy today as Citii, symbol C, dropped 20% to close at $2.94/share and MGM closed down 20% to $5.02/share. The Banking Index FAS dropped like a rock today closing at $6.56 for a big 30% drop. I said I thought it should be sold back when it was $9.75 on last Monday.

The VIX closed at 39.18. I suggested this Index would go back between 40 and 45 in my post on Saturday. The Put to Call ratio closed at 0.93 today.

Oh, to answer the question raised earlier, I think it is not too late to buy TZA. :)

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The exposure for President Obama at the Latin American conference had me nervous

After the Latin American summit, I was very upset to see President Obama giving his Press Conference yesterday outdoors, but not for the reasons you might think. What I was upset about was the poor job the Secret Service did in providing security and protection for the President. The President should never have a backdrop like that, which exposed him to potential harm. In this day and age I put nothing past kooks out there. The news conference lasted 45 minutes and I was nervous the whole time watching it. Was it just me or did any others have a similar feeling watching that news Conference and backdrop? That backdrop, while a beautiful scene, put our President unnecessarily at risk and I didn't like it, especially on foreign soil. I loved President Kennedy and was devastated, when he was shot in Dallas, I don't want anything to happen to this special President we have now. I respectfully suggest that the Secret Service needs to review this and do a better job going forward. I shouldn't even have to worry like this but I do. We have too much riding on President Obama, especially after the 8 terrible years of Bush/Cheney.

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Saturday, April 18, 2009

The Markets in review and outlook for week ahead

Many were surprised at this week's market action. I know I was! I had predicted a market pullback last week going into this one and had also said mid week that the range of the Dow and S&P 500 has gotten much tighter and I did not thing we were going to go to higher than 8,500. This tightened this new range on the Dow from 7,500 to 8,500. I also said we had come to almost 8,200 and to me it was riskier to stay bullish then it was to believe we should go down from here. So where did we end up now that we have the advantage of hindsight?

First ask yourself this question. Did the market go up steadily this week? Don't look it up just think how you felt about the week. Ok, here's how it ended. The Dow was up only 48 points for the entire week, closing at 8,131 compared to a week ago Friday when it closed at 8,083. But didn't it "feel" like it was going up all week? How could it move up so slowly to only a 48 point gain for the week? To me it was a very controlled market. By controlled I mean the big Institutions controlled the market action this week very tightly. Why, you wonder? Because everyone who could fund and IRA or Retirement account did so, and the inflows, although less than other year's funding, because of the more unemployed, still represented new money. They did not want to scare you just yet as they want this new money to be invested into the market so they can go short and take it without causing much more harm to the overall market. They just want your money.

What was the play in my mind this week. It was raising cash by selling and/or buying ETF Ultra Short TZA or SDS or any of those instruments which are Short the market. From here ahead, I don't see a precipitous drop back down to the 6,440 low on the Dow and corresponding other indexes like the S&P 500 or Russell 2000. But I do see us meandering lower now that the psychology seems to have changed around to this recession is going to end and things are looking better or there is a "glimmer of hope" out there. That means you can buy these ETF's near their lows now and watch them rise as the market pulls back.

I purchased the ETF ULtra Short, TZA, this week several times building a very decent position with the shares. My last purchase was at $31.97, which is very near the new low for the ETF of $31.66/share yesterday. I expect to make at least $15-$20/share on this ETF before long. Remember back in the beginning of March, this ETF was at a high of about $112 and at the end of November was above $150/share. So there is plenty of opportunity here to make some very high profits. The risk is that the market is now going to continue to climb back up to 9,000 and things are going to be much better in the economy. Either way it goes, we win in a sense, don't we.

You will notice there are 2 charts I posted this week. One is a chart of the Put to Call ratio (if you click on it it will enlarge and then go back a page to come back here). You will notice that in my view there are new Buy and Sell levels to consider in using the Put to Call ratio as a tool. Any movement outside the last set of red bands signal either a Buy or Sell. If it drops low, Sell and if it goes above the upper red band Buy. You can see there has been a shift down on November 19th and 20th, the last clear buy signal at 1.40 and 1.31 respectively. This was when the Dow hit 7,500 and then went back up to over 9,000 the first week in January. There was a Sell signal on February 9th when the Put to Call ratio hit a low of 0.67, which began the descent of the Dow from about 8,000 to the low of 6,440 culminating on March 6th and 7th. You will notice the signals from the Put to Call ratio come a day or two ahead of the market move.

I also have said to watch Gold prices as a tell of market direction. I had expected the price to go back up over $900/ounce this week and stay there but it didn't, as the market did rise instead of drop. As you can see from the other chart both Gold and Silver dropped in price this week. Both metals are used not only as a currency play but is used in manufacturing. If you look at how both Platinum and Palladium acted this past week and over this 3 month period for each of these charts, the prices have steadily risen. Something must correct here. Either Platinum and Palladium are going to have a significant pullback, which I doubt, or Gold and Silver prices are going to start to reverse course and increase again. I think that is a more likely outcome given we have set in place prices of all commodities to rise as inflation rises due to the stimulus efforts of countries around the world. Inflation is the major concern of world leaders going forward.

I realize this is a much longer post than usual about the market, but I felt it was necessary to get people to be grounded again in reality. Things are still very bad. The unemployment rate will get worse. Foreclosures will rise both in Residential and now Commercial Real Estate, not only because of the increase in the ranks of the unemployed, but also because more loans will be re written with higher interest rates than many had during the Sub-prime lending years. Those mortgages are set to move to higher interest rates throughout the remainder of this year and next year, compounding the present housing problems We are far from being over this problem. Invest with an eye to taking profits when available. The mantra should be preserve Capital for the next year. On a final thought, today's San Francisco headline is that the Unemployment rate for California for March is now 11.2%, the highest in 68 years.

I also invite you to take the mini poll on the right margin if you have not done so this month. I have data back to December from this poll and I am trying to see any trends in people's view of the recession. Thanks for the visit and come back when you can. You can also subscribe to this site by clicking on the Orange RSS logo. You will be notified via email every time I post anything new. Thanks!

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Thursday, April 16, 2009

Market outlook: Have I changed my mind on market direction?

Yes, the market surprised me again today as it closed up over 8,100 to a close at 8,125. Did this change my view as to market direction next week? Nope! The reason I am not deterred from my view here is that Volume was down again from yesterday and it has been every day since Monday. A good rule of thumb is this, if the price is rising and the volume is dropping watch out, a big drop is close by.

Well tomorrow the Options Expire for April. Let's see how it ends but I have prepared myself for a selloff in the next week. Today I added to my shares of TZA at a price of $33.59, nearly at the low of the day. The Put to Call ratio closed at 0.76 and the VIX Index closed at 35.79. And today Gold dropped a lot to close down $16/ounce to $876. I said to watch Gold and it sure did drop but I see this too will rise next week but time will tell. Everyone has funded their Retirement accounts and I don't think they will commit to buying until the market pulls back substantially.

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Wednesday, April 15, 2009

Wednesday's market action doesn't change my outlook

That's right. The piece of data which did not produce results was that of Volume. Today's volume was less than yesterday and to have a rally one can believe in you need to have today's volume surpass yesterday's and it was clearly less than Tuesday. The VIX Index dropped more today closing at 36.17. The Put to Call ratio climbed back up to 0.96 from the low from the previous days. I expect volume to increase tomorrow to the high for the week and then beating it again on Friday, Options Expiration. Unless we have a breakout to the upside on high volume, I believe next week we will pull back. However, many have funded their 401K's and IRA's at the last minute today so there is money to buy if investors are so inclined.

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Tuesday, April 14, 2009

What Machiavelli could teach us about how to deal with Somali Pirates (UPDATE)

The U.S. faced its first test on dealing with the Somali Pirates plaguing other governments for a long time. What did we choose to do when confronted with the Situation? We chose to engage in a military way and eventually shot and killed 3 of the Pirates by sharpshooters about the U.S. Bainbridge. What happened as a result of this effort? They saved and freed the Captain of the ship. We are all thrilled for the freedom of the Captain, who by the way lives in Vermont, my home for 20 years. What has been the Somali Pirates reaction to having 3 of their members killed and one captured? They have vowed revenge against the U.S.

From yesterday to today 4 other ships have been hijacked. None of them with American crews but it is only a matter of time and you know what will happen. I pity any of the sailors and crew members of the ships taken as there will be killings for sure. How would Machiavelli have dealt with the situation?

Well first he would have said to never strike at an enemy unless you plan to totally destroy them. Unless we were willing to go to their home base and to engage and destroy them there, we should never have agreed to start the violence in the first place. No sailors have been harmed as a result of these Pirates. They just wanted worthless paper called "money" which is being printed faster than it can be counted by government printing presses. Now we face a significant escalation by a people who while thugs and criminals are just trying to survive as we all are. Now don't mix up understanding with leniency or understanding with being soft, as I am not soft as many of my friends will tell you. My point is this, we don't have a winning strategy here and by our actions have guaranteed an escalation of events and the killing of innocent people next time, ours!

Unless we are willing to take the battle to Somali itself, Machiavelli would have done either nothing or been willing to go all the way. It doesn't seem like the world has the will to go all the way as they have all paid their captors ransom. Now some of their innocents are in danger as well. You might be interested sometime to read "The Prince" by Machiavelli. It will be an eye opener in how best to deal in crisis.

UPDATE: 9:00am PST April 15th

Here's the latest news on the Somali Pirates response to the killings on the Pirates by American forces.

Somali pirates vow to hunt down, kill Americans

By ELIZABETH A. KENNEDY, Associated Press Writer – 15 mins ago

MOMBASA, Kenya – Somali pirates vowed to hunt down American ships and kill their sailors and French forces detained 11 other brigands in a high-seas raid as tensions ratcheted up Wednesday off Africa's volatile eastern coast.
Pirates fired grenades and automatic weapons at an American freighter loaded with food aid but the ship escaped and was heading to Kenya under U.S. Navy guard.

The Liberty Sun's American crew successfully blockaded themselves inside the engine room — the same tactic that the Maersk Alabama crew used to thwart last week's attack on their ship. They were not injured in the attack Tuesday night but the vessel sustained some damage, owner Liberty Maritime Corp. said.

One of the pirates whose gang attacked the Liberty Sun said Wednesday his group was specifically targeting American ships and sailors.
"We will seek out the Americans and if we capture them we will slaughter them," said a 25-year-old pirate based in the Somali port of Harardhere who gave only his first name, Ismail. "We will target their ships because we know their flags. Last night, an American-flagged ship escaped us by a whisker. We have showered them with rocket-propelled grenades," boasted Ismail, who did not take part in the attack.

The French forces launched an early morning attack on a pirate "mother ship" after spotting the boat Tuesday with a surveillance helicopter and observing the pirates overnight.
A "mother ship" is usually a seized foreign vessel that pirates use to transport speedboats far out to sea and resupply them as they plot their attacks. The ship was intercepted 550 miles (900 kilometers) east of the Kenyan city of Mombasa.

The French Defense Ministry said the raid thwarted the sea bandits' planned attack on the Liberian cargo ship Safmarine Asia. The detained pirates were being held on the Nivose, a French frigate among the international fleet trying to protect shipping in the Gulf of Aden.

The attack on the Liberty Sun foiled the reunion between the American sea captain rescued by Navy snipers and the 19-man crew of the Maersk Alabama who he saved with his heroism.
Capt. Richard Phillips had planned to meet his crew in Mombasa and fly home with them Wednesday, but he was stuck on the USS Bainbridge when it was diverted to help the Liberty Sun. The crew left without him, flying to Andrews Air Force base in Maryland in a chartered plane.
Despite President Barack Obama's vow to take action against the rise in banditry and the deaths of five pirates in French and U.S. hostage rescues, brigands seized four vessels and more than 75 hostages since Sunday's dramatic rescue of Phillips.

That brought the total number of sailors being held by Somali pirates to over 300 on 16 different ships — a distinct surge in the number of captives over the last few days.

Pirates can extort $1 million or more for each ship and crew seized off the Horn of Africa — and Kenya estimates they raked in $150 million last year.

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Monday, April 13, 2009

Market Outlook: Week of April 13th, 2009 (UPDATE)

In an earlier post, I said to watch Gold, to see where the market is headed. If you look at the chart above, Gold this morning is only a few dollars under 900 level again at 897, gaining over $16/ounce since the close of markets on Friday. I suspect we are headed this week for a correction in the market downward again.

This is also Options expiration for April this Friday. Therefore, I have decided to sell my TNA, SSO and FAS shares and to purchase TZA, which by the way hit a new low on Friday. This ETF, TZA, is a Ultra Short Triple play of Small Cap stocks. It opened today at $35.89/share. I suggest taking some or all profits on TNA, SSO, Ford, Apple and others and waiting for the pullback to repurchase the shares lower.

UPDATE: 6:45pm PST

I did sell FAS today at an average price of $9.75. I also sold all my TNA at $23.45/share and all my SSO at $23.15/share. I purchased TZA today for an average price of $34.85/share. The Put to Call ratio closed today at 0.67 and it only has closed one other day this low in a year and that was on March 18th. This was followed 2 days later by a 200 point drop on the Dow.

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Sunday, April 12, 2009

Why Saudi Arabia is filled with Mentally ill people.

If this story doesn't make you feel sick inside, go get therapy right away! Reported on CNN's web site was the following article titled, "Saudi judge upholds man's marriage to 8-year-old" Here's an excerpt from the story and my comment followed by a link to the entire story.

"Saudi judge stands by decision, refuses to annul marriage of girl, 8

By Mohammed Jamjoom

(CNN) -- A Saudi mother is expected to appeal a judge's ruling after he once again refused to let her 8-year-old daughter divorce a 47-year-old man, a relative said.

Sheikh Habib Al-Habib made the ruling Saturday in the Saudi city of Onaiza. Late last year, he rejected a petition to annul the marriage.

The case, which has drawn criticism from local and international rights groups, came to light in December when Al-Habib declined to annul the marriage on a legal technicality. His dismissal of the mother's petition sparked outrage and made headlines around the world."

If this isn't enough to garner your support to get off foreign oil, I don't know what is. Saudi Arabia should be an enemy of the United States, especially since most of the hijackers from 9/11 were from there. Their religious bent is the cause of much of the world's problems right now. The Bush family cozied up to them ever since they bailed out George W. Bush from bankruptcy form his poor management of his Oil company many years ago.

Now we had President Obama visiting there on his trip after the G-20 and we have Obama bowing to this country's leader for the press to continue the berating of President Obama for the bow. It was inexperience that caused his faux pas, not his admiration for the king nor the country. But we need a real about face in relations with this "Kingdom". You can tell this story has infuriated me as a father and as a man. Allowing anyone to marry an 8 year old child is criminal at least in any normal part of the world. Obviously Saudi Arabia is filled with unfit humans whose minds are twisted with ideological teachings by mentally ill clerics. Shame, shame shame. This isn't a religion, it is a society of mentally ill people who belong in Institutions!

To read the entire news article from CNN News click here.

Take Mini Poll: How long will the recession last?

Even if you have taken the mini poll on the right margin before, it is appropriate to take it again as much has changed in the past month. So please take the Poll and let's see when people believe the recession will be over. The data will be summarized on May 1st. Please vote only once within a month. Thanks so much.

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Saturday, April 11, 2009

GOLD settles back again while the market rises

Gold has finally gone down as the market has gone up. On March 17th I said the following, "If Gold can get back below 900 watch the market move up more strongly. Gold is at 916 in pre-market. The low closing last week was 905. We were as low as 820 in January and I can see Gold pulling back significantly to these levels if news continues good."

As we now know from the 3 month chart above, after that statement on March 17th, Gold shares soared after the treasury decided to buy back Treasury notes, going to 952 before settling in back at the close Friday of 880. That is a significant pullback and shows the rally for the past 30 days is for real. Watch for moves up in Gold to signal a market reversal.

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Market outlook Update: Wednesday, April 15th, taxes are due

I have updated the chart above with an additional Red downtrend line which says to me that we will not go over 9,000 on the Dow, in this latest move up, unless the news is very, very good on the economy. So we will be in a tighter range than we were before and some, including myself, would be wise to consider selling around 8,600 or so and taking profits on ETF's like TNA and SSO and also Apple and Ford stocks as well.

From the chart above you can see we are going to most likely be in this band from 7,800 to less than 9,000 for a while and with each day making the case going forward for selling before we hit the top of this range. By the way, the 200 Day Moving Average hits right now at about 9,200 and will be going lower and lower each day. Again to emphasize, news will be the main market mover in coming days and weeks. One day earnings will be unexpectedly great for a company which will steal the headlines for that day and another grim with worse than expected earnings for others. It will be volatile. Right now the Volatility Index, symbol VIX, is below 40 at 36.50, but expect this to go back sometime soon to 44-50 again.

Money will be put into 401K's, IRA's and other retirement accounts this week as taxes are due April 15th, Wednesday this week. And some may want to put those funds to work right away. So I see this week still being positive and increased volume on the Buy side.

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Friday, April 10, 2009

Market summary 4/9/09 and going forward

I thought you might be interested in the updated chart I had shown on 3-23-09 of the Dow Industrial Average. As you will notice in the chart above, there is no doubt we have moved up into the upper range off the recent market bottom. We broke the Red downtrend line as you can easily see. The volume was very good on Friday and we closed at the high of the day. This may carry us into early next week with some positive momentum. We closed at 8,083 on the Dow and the chart looks good for a gain going forward. Whether we go to above 9,000 will be totally based upon the news and how the stimulus is perceived to be working and how the banks are doing. Wells Fargo's earnings of $3 Billion profit for the quarter definitely sparked this market rise, but Wells is one of the more secure and sound banks. We still need to hear next week from Bank of America and I don't see it doing as well as Wells. Nor do I see Citigroup doing as well either. But if they don't do as bad as expectations they could drive the market much higher on their news.

My Bank Index shares did well on Friday, symbol FAS, climbing 40.7% to $8.71/share. It is Direxion's Financial Bull x3 shares which is a Triple play. In December, these shares were between $20-30/share.

Those who had purchased Apple shares when I did at $83/share have seen these shares rise to almost $120/share and those who purchased and still own Ford when I bought mine at $1.70/share have seen there shares rise to $4.24/share. These are huge gains.

I still own these two ETF's, the first being TNA, which closed on Friday at $23.16/share and the other SSO, closed at $22.90/share. I see both of these ETF's continuing their rise. If they seem to stall and you are concerned that your gains might be lost, consider buying TZA as it is an Ultra Short Triple play and it can be used as a good hedge if the market reverses. But do not buy it until you see TNA starting to reverse course. Watch the charts and not only Price but Volume as well. I would only buy those shares for a short period of time until the market direction is clear again and consider it an insurance policy.

If the market continues to rise there will be something to consider. That being, when to sell. I suspect some who sell soon, will be faced with either wishing they hadn't or buying back the same shares at a higher price. There is nothing wrong with taking a profit, especially if you can see a better stock which will grow at a faster rate. When I sold my Apple shares at $97/share I left about another $20/share or 20% on the table. But by buying FAS, I have seen a faster growth rate. I was just lucky on this, as I could have jumped out too early.

When we are fearful we have memories of the big market drop we have experienced over the past 6 months and don't want to repeat it again. So our tendency will be to sell early or get on the bus too late. That is why I have repeatedly said I believed this rally was for real and that most wouldn't believe it. Many still don't. I do! Do you?

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Thursday, April 09, 2009

Is this really Kim Jong Il? You be the judge.

Is this really Kim Jong Il? The newer photo showing him grayer, was from when he was taking part in voting at Supreme People's Assembly of the country Thursday, April 9, 2009 in Pyongyang, North Korea. You be the judge from the photos. To me they look like different people, maybe an impersonator used to fool us. Maybe they are trying to pull the wool over our eyes. Maybe he died? If I saw a Voice Recognition pattern showing they were identical I would be more inclined to accept it. To me he looks like a close double. You be the judge. Leave a comment on what you think.

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Wednesday, April 08, 2009

Market review of today's activity.

We did manage to go back above 7,800 on the Dow today, closing at 7,837 while the S&P 500 closed at 825. The VIX Index closed at 38.85 and the Put to Call ratio closed at 0.86. If we can make it through tomorrow above the 7,800 level it would be good as we have a 3 day weekend. Markets are closed al day Friday.

So here we are holding again and extending the time at this level. What does it mean? To me it means many don't want the market to go lower and the shorts are afraid it can go up quickly so they also are cautious. So we have a standoff right now and a tight range at the bottom of the 7,800 to 9,300 range or at the top of the 6,400 to 7,800 level depending on which way you think we are headed.

Unemployment makes this a horrible recession but the leading story in our local San Francisco paper this morning was all the homes the Banks are just keeping that have been foreclosed, rather than putting them on the market and selling them. Obviously they are hoping for better days ahead or they would be selling them. Many take this as a bad sign about the problem with the Banks. I take this as a good sign that the banks actually can see some recovery going forward. You choose what you want to believe. The more disturbing news today was brought to me by a neighbor who told me that many loans for properties are not going through approval. He quoted me that out of about 40 mortgages applications, only one is getting through and approved. He should know as he is in the business. Let's hope this frees up soon.

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Market update April 9th, 2009

The stock market has been dropping slowly the past few days. It hasn't been with the wild swings we have come to expect, although yesterday had a 200 point swing on the Dow and closed down 180 points, closing below the 7,800 level at 7,790. The good news is that Volume has been down this week compared to Monday and Tuesday last week. So today is an important day as we really need to close above the 7,800 as it is a slippery slope down from here.

The Put to Call ratio has risen the past few days to 0.96, and while not high gives a chance to have the markets rise today. Cooperating in that endeavor is the VIX Index, which a measure of market Volatility. It closed again at 40.39 yesterday, off its high of 42.50 yesterday.

The government is extending loans for troubled institutions from 3 to 5 years which is helping ease concerns and last but not least, President Obama is back from the G-20 meeting in Europe and the side trips he took to Turkey and Iraq. It will be good to see him back on the economic issues, as these are his number one priority.

Earnings announcements will be the focus over the next week or two as to the real health of the economy. But they too are a look backwards. Watch for markets to react positively even when there is bad news from a company, as the news wasn't as bad as expected. We are in limbo right now and the trend still is not clear if you look at the 1 year chart of the Dow and S&P. We need more time to play this out. Stay tuned!

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Monday, April 06, 2009

What's going on in the market right now?

It appears to me what is driving the market is not the Dow 8,000 level but rather where the 50 and 75 day Moving averages are and what range of the Dow are we currently between. Both the Dow and S&P are above the 75 day Moving average but that trend is going down, not up. As I posted recently a chart of the various ranges of the Dow and have added it here today, you can see the range we are in is between a Dow of 7,800 and 9,200. As long as we stay above 7,800 we remain out of the bottom range of 6,400 and 7,800. If we drop and test the 7,800 we could be dropping back to the lower range and then retesting the lows of 6,400 but I do not believe this is going to happen. This is why I bought more shares this morning of TNA at the $19.90/share level.

News will drive the direction of the market, where data looking backwards will not have the impact it had 5 months ago like unemployment data or Factory orders. These pullbacks are opportunities but a frightened investor will simply watch by the sidelines, like a deer in your headlights. This market is not for the weak of heart or those of low risk tolerance. Don't use money you can't afford to buy shares.

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Citigroup shares sold this morning.

I sold my Citigroup stock, symbol C, this morning as there were comments by Tim Geithner over the weekend saying if any large banks needed significant funds they would insist on restructuring changes, as they did with GM. I decided now was the time to leave Citi's stock. I had purchased shares at $1.70 and another group at $2.41, so this was definitely a profitable trade.

I still own a Bank Index ETF, symbol FSA. I had already sold Ford shares and Apple shares so now I have both SSO and TNA shares and a few others I own as long term holds. I do now have cash to buy on dips.

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Saturday, April 04, 2009

Summary of ETF positions: TZA and TNA

I thought I would make a short post here on what is going on with some of my favorite ETF's both Longs and Shorts. Let's start with the ETF Ultra Short TZA. TZA has hit a new low this week going as low as $39.36. This is a 52 week low for it, although the ETF has been only in existence since beginning of November. If you by chance still own this triple play you are in for more pain as I see this going much lower before a significant market pullback gets it to rise again. Here we sit on the Dow at 8,017 as of the close Friday, and it is possible that the Dow could go to 9,300 again. This would be a 16% gain for the Dow and the S&P would gain likewise. Since this is a triple play, meaning that for every % Gain or Loss in the market these gain or Lose 3%, it would mean a 48% possible loss on TZA from here. Now that is real pain. It's high since November has been $156.58/share.

On the contrary side is TNA. This is the Ultra Pro Long position of the Russell Small Caps. This could go up as much or more than 48% from here. That would be delightful for those owning it, which I do currently. As momentum gains in the direction of rising prices of these triple plays, they often surpass any reason and usually go straight up at their extremes. TNA closed Friday at $21.94, and if we assumed a 48% rise this ETF would go to about $33/share. However this ETF has been as high as $58.87 when it too was introduced the beginning of November. I could see TNA going much higher on momentum than $58/share. So when this market really turns around, you will want to own TNA.

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Friday, April 03, 2009

Market review and outlook for week of April 6th, 2009

The market is down at the time I am writing this today. However, given the Unemployment rate rose to 8.5% for March the markets are taking the news remarkably in stride. The Dow yesterday went over 8,000 for a brief time and closed at 7,978 while the S&P closed at 834.

As I stated last week on March 28th, and I quote, "So what's ahead for the week of March 30th? I am overall still optimistic on the market. Many see this as a Bear Market rally and can't see the Dow and S&P 500 going much higher. While I agree that this is still a Bear Market rally, I do believe we can go as high as 9,000 on the Dow before we pull way back again." I also said this, "I am hopeful this coming week of staying above the 50 day Moving average, but as I have cautioned before, if you are trading, pay attention as this market can go in either direction very quickly. One indicator next week will be the Unemployment rate and we already know it won't be good. But it is a look backwards..." It seems this latter statement regarding the Unemployment was close to what has transpired today. I don't see any change from that view.

The Put to Call ratio went to a high for the week of 1.14 on Monday, but since has dropped to about 0.72 today. The VIX Index is also quiet now at about 40. It seems to me that shortly those who are Short on this market are going to wake up and see the markets rise and finally have to cover giving the market its next surge back up to stay well above 8,200 on the Dow and 850 on the S&P 500. The markets are not going to sprint to above 9,000 anytime soon. But we will steadily gain a few percentage points at a time over a week's duration. It will help return some confidence to markets and to the Consumer eventually.

I believe this uptrend will take us into the summer months and we will remain within the range of 8,000 to up to 9,300 until September and October when we all will know if the strategy to get the Banking system and economy back on it's feet. If we haven't by then, the markets will retreat and retest the lows at the 6,400 level. So if you think we are going to eventually make it, then it is time to start buying back into this market with fresh funds, as watching from the sidelines is going to feel like a huge missed opportunity.

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Wednesday, April 01, 2009

Proud today: President Obama makes us look good again.

I am having the experience today that we have a President we can all be proud of, representing us in London, at the G-20 meeting being held there. He is intelligent, an articulate speaker, a deep thinker and prefers collaboration over demagoguery. This is such a contrast to what we, and the world, experienced under the Bush/Cheney leadership. Just think about this other fact. The protesters are NOT protesting against our President at the G-20 and actually like him. This has been unheard of in the past decade.

It's time to feel good again as an American. Now we all must support this President even though there may be parts of what he wants to do, which we may disagree with. It is time we close ranks as Americans and start a new day. Republicans got the first glimpse of what they have to look forward to, when yesterday the election in the 20th District of NY voted in favor of a Democrat instead of the usual Republican candidate. If Republicans continue to just say No to the President's agenda and budget requests, they will lose everything in the November 2010 elections. I'm tired of them trying to use failed strategies in these new difficult times. It is one of the reasons we are where we are today in the Banking system. Deregulation went rampant under Bush/Cheney. The last election of President Obama should have put their failed approach in the dumpster where it belongs. But don't hope the Republicans will get it as they are more ideologues and they will pursue failed policies to the biter end. Unfortunately we all lose when they do. So let's all help each other rather than just looking out for ourselves. We are stronger when we are together and a team of Americans than when we divide into self serving factions. Yes, I am very proud today and am happy to be able to reflect on the significant changes of the day.

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March Mini Poll data summary: How long will recession last?

Here is a summary of the Mini Poll data for March as compared to December, January and February.

First the question.
How long do you believe this recession will last?

Data for December, then January, February and March:
Mid 2009 4%, 17%, 10%, 12%
End 2009 35%, 25%, 24%, 21%
Mid 2010 15%, 13%, 12%, 3%
End 2010 15%, 10%, 4%, 18%
Mid 2011 12%, 17%, 10%, 3%
End 2011 8%, 0%, 10%, 3%
Mid 2012 0%, 0%, 2%, 3%
End 2012 0%, 0%, 2%, 0%
Much Longer than the choices you have provided 0%, 0%, 10%, 12%
We are going to be in a Depression 12%, 19%, 18%, 24%

If I summarize by Year:
2009 39%, 42%, 34%, 33%
2010 30%, 23%, 16%, 21%
2011 20%, 17%, 20%, 6%
2012 0%, 0%, 4%, 3%
Depression 12%, 19%, 18%, 24%

Sample size for December was 26, for January 48 votes, for February 51 votes and for March 39 votes.

The largest change in the data showed that many now believe that we will go into a Depression.

Now March had one major voter voting more than once during the month and they voted for the Mid 2009. I took out the duplicate those duplicate votes in the data above.

I have cleared the data accumulated from the Mini poll so feel free anytime this month to enter again when you believe the recession will end. We can all see how the results change over time. I wish more would vote as with a bigger sample size it would become more statistically relevant but I am appreciative for those of you who do vote so thanks!

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