Today's Market
by Dr Invest

I want to make some money! So does everyone else. I'm sitting on my pile of cash and wondering, when can I put this money to work? Most important, where can I put this money to work?

Two blogs before this one, I predicted that the DOW could break through 12,000 and continue to climb through Christmas or that it could climb to 12,000 and begin a downward trend.  It is still to early to know whether the trend is up or down, but today the DOW fell 207 points. Yesterday, I mentioned a Sucker Bull Market. To confirm whether the rally is real or not, requires us to look at a 10, 20, or 50 day moving average that is compared along with a 200 day moving average. The 10 day moving average, compared along with a 200 day moving average is LESS SAFE (more volatile) of a purchase than a 20 or 50 day moving average compared along with a 200 day moving average.

Building a Chart Step by Step

Go to www.stockcharts.com selecting ENTER A STOCK SYMBOL. In the blank, enter DJIA and select GO. You will see the SHARP CHART, but below the chart are several large boxes with a grey background. Select the second box titled: OVERLAYS and then look for the SIMPLE MOVING AVERAGE, changing 50 to 10. Select UPDATE. Now go to look at your chart.

Now you know how to make your own chart and how to identify both the 200 day moving average and the 10 day moving average that you set for the chart. A 20 day moving average, compared to the 200 day moving average would be less risky and a 30 day moving average, compared to the 200 day moving average would be even less risky than the 20 day moving average.

What is important for you on this chart, as an amateur investor, is the CIRCLE. The 10 day moving average has not risen above the 200 day moving average. I even tried a 5 day moving average compared to the 200 day moving average, and still the 10 day moving average did not rise above the 200 day moving average.

This is why we call this a SUCKER BULL MARKET. It looks like a rally because of nearly thirty-days of an up-trend in the market; but if you drew a horizontal line across the recent highs at 11,700, you would see that the break-out has risen only 11,900 falling by the end of today to 11,706. This is hardly a rally and a place where many investors can lose money with only the day traders walking away with their cash.

WAIT! Yes, I said, WAIT! Now is not the time to buy stocks. Yes, the 10 day moving average could move above the 200 day moving average, but understand to move to early in trading this market will at best be speculation and at worst, GAMBLING.

The Euro Union Rescue

I was horrified to hear that the market was rising solely on the promise of a Euro Bail-out. The most depressing display of math-illiteracy by investors last week was the excitement over a report suggesting that France and Germany had agreed to a 2 trillion euro bailout package for Europe, which triggered a "risk-on" tone for the rest of the week, even after the report was retracted as inaccurate. Moreover, Europe has just gone through a tooth-pulling process just to approve 440 billion euros for the European Financial Stability Fund (EFSF) from all EU members combined.

So barring new dedicated funds from Germany and France, which had zero chance of being forthcoming, the only way you could morph 440 billion euros into 2 trillion euros was for each of those 2 trillion euros to really be only 22 euro cents of protection. In other words, you could only say that the EFSF would "protect" 2 trillion euros in European debt by limiting the protection to about 20% of face value, without using any of the funds to recapitalize banks or deal with much deeper probable losses on Greek debt (50-60%). Those losses alone will gulp down a large chunk of the EFSF (not to mention post-default needs to stabilize Greece over the longer-term, which the Troika estimates at another 450 billion euros).

Listen, the yield on one-year Greek debt closed at 183%, a new record, and up from 169% the prior week. Yet on Friday, the market rallied on hopes of a comprehensive "solution" to the European debt crisis, and took heart that part of an 8 billion euro hold-over loan to Greece was approved. The 1-year Greek yield pushed 3 percentage points higher.

At 183% interest on the Greek debt, the debt would double every 5 months and more than quadruple every year. No amount of AUSTERITY will resolve this problem and the EURO UNION doesn't have deep enough pockets to pay for the debt.

I think you see the dilema here. This prickly situation cannot be brushed aside and it is suggested that those who have loaned the Greek goverment their money, may need to take a haircut of 50% or more. Doesn't it just make you want to go out and purchase some Greek Bonds right now?

Another Look At the Chart

If you are invested in Stocks, ETFs, or Mutual Funds you need to be prepared for a return to a Bull Market. I am hoping that we will get a SEASONAL EFFECT from the Holidays and I am preparing for what stocks I might hold for two or three months, but the signs seem to point to a continued BEAR MARKET.  Look at the chart below:

The orange triangle that seems to tilt-up is called a "RISING TRIANGLE PATTERN". If you look at the pattern closely and think how a bear attacks, it resembles the tilted head of a bear, with his neck close to the ground, coming in for the kill. This pattern does present to me an element of fear.

This pattern, suggests a return to the 10,000 level of the DOW. (see www.chartpatterns.com) Again, this is only a suggestion and you should recognize that the market is going to do what the market does. I hope that tomorrow, the market will resume and up-trend. But there are some things that indicate that the market might move lower.

Use Protection

If you have stock related investments and your philosophy is not a genuine BUY AND HOLD philsophy, consider how much you are willing to loose and then put a STOP-SELL on your investment. If the market does begin a decline, it could be a 10 to 12% drop before it begins to climb again.

Yes, I know some positive minded economists claim a 3% gain by the end of the year. I am not negating that idea and hope that it happens, but protect yourself. A very safe investment at this time are CDs (certificate of deposits). Like stocks, ETFs can be purchased and traded like stocks. Vanguard Total Bond Market (BND) gives you access to BONDS which will rise as stocks fall. Be sure to do your research by going to STOCKCHARTS.COM and entering the BND symbol. Another ETF is the iShares Barclays TIPS Bond Fund (TIP). REMEMBER the Bond funds will MOVE UP as the market MOVES DOWN. Should the market continue to climb, your bond fund will slowly lose value. I do think that these bond funds over the next year, will produce a return. BND has returned YTD 6.61% and TIP has returned YTD 10.23%.  And yes, I am invested in TIP and BND. A composite of 8.42% between the two bond funds YTD is not terribly bad in the light that the DOW has only returned 1.12%.

(Note: The above article is for entertainment purposes only and should not be considered investment advice under any circumstance.)

drinvest@mail.com

Today's Market
by Dr Invest

I want to tell you something that you already suspected. Yes, it is just a whisper, but your investment can rise or fall on that one whisper. The market is filled with secrecy and misinformation. If I manage 4 billion and have just purchased 200 million of XYZ stock, I want to get on CNBC and suggest that you buy XYZ stock. The price of XYZ stock will rise, I'll sell, and you will be left holding the stock.

If I am a politician, I don't want to cause world-wide panic in the markets by telling the truth. Instead, I will use well crafted words to describe the impending collapse of the financial markets. You can't always trust what you hear and little of what you see. Although illegal, some fund managers buy into a STOCK, causing a rise in the price, whereby others get on-board. The fund manager can then sell, reaping the profits of a stock that was bid-up in price. This is called, FRONT RUNNING. Check it out on Wikipedia. This is the accusation first leveled against Madoff, who ran a ponsi scheme.

Like everyone, I have some sense of intuition about the market, but you can't be profitable on intuition alone. Hoisington Management in Austin, Texas, manages only 4 billion dollars for pension funds, city governments, non profits, and institutional organizations..etc. I think it would be exciting to know what kind of ideas a company like Hoisington would have on the remainder of 2011 and into 2012. This kind of report would cost me thousands and there are many companies that charge thousands for this information. So, I'm doing you a favor by showing you this webpage. MARK this page, save it to favorites and then save it to your desktop. Here's the address: http://www.hoisingtonmgt.com/hoisington_economic_overview.html   I suggest that you read Dr Lacy Hunt and Van Hoisington's report before moving ahead in making immediate investments.

Potential Downgrade to U.S. Credit Rating

Moody's is now threatening a down grade for the U.S.  They say, "If the super-committee of Republicans and Democrats established to cut and reduce the U.S. debt fail to do so by $1.3 trillion by November 23rd, they too would have to downgrade the U.S. credit rating. This would certainly push the market over the edge with the past 20 days of upward trend rapidly falling. It looks a little like a SUCKER'S BULL MARKET.

The continuing problem that the U.S. is facing goes back to one simple fault: The U.S. spent more than it took in. The result is debt as the U.S. has never known. And if you think it is all the fault of one political party, you are wrong. Look at the chart below.



Instead of talking what caused the debt, we just want to make a note that it does exist and that it is owned by all the citizens of the U.S.

The Austrian economic school had it right. When you maintain low interest rates for far too long it creates as excessive credit boom that leads to the destruction of personal savings and malinvestment. Well, ladies and gentleman, here we are. Thirty years of excess has deteriorated economic growth, as increases in debt have destroyed economic growth by diverting personal savings away from productive investment.

The simple observation about human nature is: Why save when you can have all you have wanted now? With all the borrowed money floating in the market it is no wonder that the market didn't crash sooner. Below is the chart that shows the result of 30 years of excessive spending.



Instead of manipulating fiat currency by lowering interest rates and adding quantitative easings, with government purchases of bonds and bond twists, the real answer is less pleasing. WE NEED TO TAKE OUR MEDICINE! That medicine is PAYING OFF OUT DEBT and SAVING MONEY. Sadly, governments across the globe are financially under pinning their failing banks because to anything less would result in rioting in the streets. Though we don't want to hear the truth, the only solution is ten years of AUSTERITY. That is the word that we don't want to hear.

What the government can't understand is why no one is buying more when loans are offered at such ridiculously low rates. Most people can't even qualify for a loan and those who can qualify for a loan are smart enough not to take it. Just look at the personal savings rate in the above graph.

Both businesses and the individuals who can save are keeping their cash close at hand. Obama announced today his goal to change eligibility standards for the three-year-old Home Affordable Refinance Program to encourage new, lower-cost loans to more homeowners who owe more on their mortgages than their properties are worth. This as effective at pumping gas onto the fire to save the house. Instead of making the bar higher, don't have a bar. Rewrite the rules, but above all else, draw people further into debt. About that word, AUSTERITY, well according to our government, it doesn't exist.

WHAT TO DO?

I know that you are not reading this to hear about theorist or political figures. The facts point to a vibrant 20 days in the stock market. Under normal circumstances, I would not blink an eye. I would buy stocks in the face of an advancing market. The only things making me reluctant to buy stocks is the outcome of the E.U. and their stimmulation package for the failing banks and the possible down grade by Moody's of the U.S. credit.

The Holiday season typically brings an upturn in the market, but it doesn't always bring an uptrend. If you are a speculator, now is the time to add some stocks to your portfolio. I would see adding more stocks at this moment as fool-hearty. Why not wait another week to make sure this rally can stand on its own two feet? For now, my vote is to STAY OUT OF THE MARKET. And should you decide to enter the market, enter with caution and a STOP SELL to lessen your losses.

(Note:For entertainment purposes only, not to be used for making any finanical decisions.)

drinvest@mail.com
      

Today's Market
by Dr Invest


There is a kind of uncomfortable feeling amongst most investors at this moment. What do you do when the market is showing every sign of advancing, but the fundamentals pointing to a decline. This is perplexing because you have to explain to your investors why you missed out on the market rally, but if you get into the market and the rally sputters and crashes into a heap, you have to explain why you lost your investor's money.

The report from the trenches is that we will continue into 2012 bordering on a recession. Bernanke reported to Congress that this downtrend would likely occur. Some analysts are now suggesting a 60% likelyhood that we will enter a recession in 2012.

Adding to the dim outlook is that the Eurotribe has been working at stimmulating the EURO across the 17 countries using the currency for the past two years. And now, with a new plan, they are going to resolve the EURO problem in three months? Probably not!

The dollar has been gaining value against other currencies. This is good for us because we have more purchase power with each dollar, but it is always true that when the value of the dollar rises stocks GO DOWN. Except, the market is suddenly in a rally. These two realities can't co-exist.

The price of COPPER is the banner that reflects the movement of the stock market. If copper is declining, the market is sure to follow. Well, COPPER is decling in value; yet, the market is in a sudden rally. These two realities can't co-exist.

Below is the S&P 500 in a recession as marked by the red line and the S&P 500 in an uptrend as marked by a green line averaged over the last ten years. The red line is very simmular to our present market. The DOW level of resistance is at 11,600 and the DOW presently is at 11,500. If the DOW can break-out of 11,600, we could see a continued rally through the end of 2011. Should the DOW hit the 11,600 barrier and collapse, we will likely continue the CONSOLIDATION PATTERN.





What can we expect from this market? Here is my guess. Just like the blue chart, with the red line showing the average monthly movement over a year for the S&P 500, I would project that we will see a series of higher highs for the next three months. What we call the CHRISTMAS EFFECT will take hold and raise the market somewhat. I would not see the DOW moving much higher than 12,000. The CHRISTMAS EFFECT will not likely continue much past December, so I would have an exit plan in place to minimize my losses.

If the DOW fails to break through the 11,600 target by mid November, you will need to be prepared to stay out of the market or if you are already in the market, you will need a carefully executed exit plan.

(Note: the above information is for entertainment purposes only and not to be used to make any finanical decisions.)

Today's Market
by Dr Invest


First, the good news. The Eurotribe has come up with a plan to insure that banks will have enough money until 2013 to continue doing business. Elated hearts, filled with glee, are now showing their trust by bidding up the stocks with the S&P rising some 8.7% since October 4th, the DOW now up some 7.3%.

In case you are thinking I am disappointed in this sudden rise, I am not. But if you think that the basic economic problem has been solved, you are frightfully wrong. KICKING THE CAN DOWN THE ROAD best describes the action taken by the Eurotribe. Make no mistake, the problems in U.S. economy have not been resolved and this action by the Eurotribe has not resolved the economic problem. Bernanke reported to congress that by 1st quarter in 2012, we would be teetering at near recessionary levels. The Eurotribe promise to cooperate in providing liquidity for the EURO has raised the value of the EURO against the US dollar, but when the time comes to cover failing European banks, politics may dictate how deeply a country's citizens will be taxed to pay for a far-away country that is not paying their fair share.

Since recessions/depressions average 9 to 14 months, KICKING THE CAN DOWN THE ROAD is a way of thowing down a banna and hoping that the 200lb. gorillia will find a cozy corner to eat take a nap without wrecking your house. What QE-1 and QE-2 has proven, is that you can't stimmulate your way out of a recession; although, you can prolong it. One noted economist observed, "It still feels like a recession.". And that's because it is.

Making Money In A Recession

Even in a recession, the market will have seasons in which it can grow. The Eurotribe has given us a nice early Christmas present. Believing that Portugal, Italy, Ireland, Greece, or Spain will be covered by the Eurotribe if they default, takes pressure off the market at least until the end of the year.

I would not go an put all my money into stocks at this time, but I would look for the 20, 50, and 100 day moving averages of a stock to determine if I could make a little money before the end of the year.

My Plan

I am watching the DOLLAR STORES for this season. Is their value consisently rising? Has the rise in price occurred over the past 20 days, 30 days, 50 days? If so, at what price do I want to enter a trade? How much would I be willing to lose? What will be the point at which I will set my stop-sell?

In this market, you want an EXIT STRATEGY. I don't see the DOLLAR STORES remaining viable after January, but who knows. Setting your STOP-SELL will guarantee that you don't hold the stock too long.

Here are some possible stock symbols to look at: DLTR, DG, & FDO. (Dollar Tree, Dollar General, & Family Dollar) Here are three other favorites that I am looking at CATM, PETM, and COST. Should these continue to rise over the next 10 days, my interest would be perked.

My Caution

Germany and France DO NOT HAVE A PLAN, there is only a PROMISE that they will work on a comprehensive plan. Furthermore, we don't really even know how the plan would work. Can you see any reason why the stock market rose 330 points? A promise is not marriage! So there is big difference between a promise and a contract. Before making a commitment to buy a rising stock, I would want to see the promised plan by the Eurotribe.

(note: The above article is for entertainment purposes only and not to be used to make any financial decision.)

Today's Market
by Dr Invest


The Market just isn't cooperating. After four days of market climb, we are yet once again slipping into the red. Yes, Spain and Italy have now been downgraded. Moody's also downgraded Portugal and a number of English banks. The dye is cast, the cement set. Hopeful traders now find themselves weighed down yet again by the Eurotribe. 

Some of the touted increases in employment were at best tepid and when one considered that half of those reported job increases were from striking ATT strikers returning to work. The only hope remaining is for seasonal hiring at Christmas and the wish for willing buyers to pump money into the economy.

What to do?

Here is what we are looking for: We need a consistent rise in the market. That means each day there are higher highs. Twenty days of higher highs is good; a month of higher highs is better; and best is three months of higher highs. The longer that the market is rising, the safer your investment will be.

So we are looking for a return to growth, something that I think is not likely. This doesn't mean that stores like "Family Dollar", "Dollar Tree", and "Dollar General" will not be a good investment and bring 5 to 8% to your portfolio from November to January. Other stocks worth watching are "Costco" and "natural gas stocks". Still, these should not be purchased without seeing some growth and most importantly, the growth for these stocks is seasonal and short-lived. ATT is a good dividend purchase at 6.05%, but in such a volatile market it seems that for the dividend gained, one could lose even more in the decline of the stock.

Danger, Danger!

One other consideration is the danger. Even if you purchase a good stock, the market can dramatically fall if there is a report of bad news. That news could come from Spain, Portugal, Greece, or Italy. Listen, this is no joke! If the market could climb this week 350 points at the last 45 minutes of the day, it could also fall that much in 45 minutes. So while the hope is that we will have a normal Christmas season, statistics seem to show that the market will remain tepid.

The Safest Place for Your Money

The safest place for you money at this time is in your BANK. The dollar is getting stronger and should continue to grow stronger when set against other currencies. A CD ladder can return a little over 1% per year, but that is better than a 5, 10, or 20% loss from risking your money for a shaky investment at this time.

Taking Comfort

You can take comfort in knowing that a strong fall in the market.. a recession... a depression, with the market falling 20 to 30% is not a bad thing if you are not in the market. Such strong falls in the market are followed by equally strong rises. So by being patient and waiting for the market to return to growth, you can see your investment increase tremendously. A recession can last around a year and a half, but within two years the market can return what was lost, plus more. That means that your patience to not return to the market until there is a marked return to growth could result in an average of 10% return per year.

(note: The above article is soley for entertainment purposes only and not to be used for any financial decisions.)

Today's Market
by Dr Invest


Sometimes what you think you see, you really don't. A mirage poses to the viewer, a truth that is not there. Also, the Market is now posing to the viewer, a truth that is not there. The market is not getting better. STAY OUT OF THE MARKET NOW.

Listen, the market was in the tank until the last 45 minutes of the day, when it rallied 153 points. What changed in those last 45 minutes? Bernanke warned today, the economy is in danger of faltering; Italy's government bonds were downgraded by Moody's; and the trend of the market is solidly down in the light that Greece cannot pay its debt. Only the implied promise that by the EUROTRIBE that they will somehow come up with a plan, sparked optimism to move the market 350 points. This just isn't rational and is typical of "Crowd Mentality". This kind of market irrationally clearly shows us that the market has not hit bottom. Alan Greenspan coined the phrase "irrational exuberance". The term "irrational exuberance" is used to describe a heightened state of speculative fervor. STAY OUT OF THE MARKET!

Keep your eye on the price of COPPER. Follow the stock symbol JJC. What you are looking for on the chart is a consistent rise in the price of copper over a 20 day period, 50 day period, and 200 day period. Of course, the longer that copper continues a trend upward, the stronger the recovery.

Bottomline, the market is likely to decline further. Should the S&P 500 get into the 900s, it would be the time to consider buying stocks, provided that there was an upward trend. This could occur toward the end of October. Just keep watching the trend.

(note: the above information is soley for entertaiment purposes only and should not be used for any financial decisions.)