What We're Reading

With July behind us, it was once again to review monthly charts and many were quite interesting.  The S&P500 negated it's monthly sell signal in May by exceeding it in July.  Not only that, but prior 2000 resistance clearly turned into support in June with the market confirming that market strength with a solid July close near the high.  My stop (alert since I don't use stops) is now below June's low.  (Click charts to enlarge)

Why the market strength?  It could be any number of reasons (or none of these at all):

• The belief QE will remain the new normal with such a weak jobs recovery
• Global easing
• Money is coming in off the sidelines (doubtful)
• Money coming out of bonds into equities (some is but not all)
• Belief that Europe and Asia have bottomed
• Housing recovery and the amount it contributes to job growth and GDP. 
• Hope Obama's proposed Corporate tax cut passes
• Anticipation of China growth
• Anticipation of earnings growth
• Well the pundits said the 2nd half of t

Jobs+Speech+7 30+Fact+Sheet+FINAL+for+RELEASE by caitlynharvey

"A couple of weeks ago, we recommended to clients to buy the September Natural gas $3.50-$3.60 put forabout $500-$900/contract for a potentialprofit of $1200-$2,000 (3x to 5x) return over the next month." From Cumberland Advisors hat tip @Ritholtz

However GannGlobal is proposing a runaway move in commodities is fast approaching.  If you're a believer in "herd" mentality (that big investors move together as a herd and the herd moves the market), you may wish to checkout their video and register for their free webinar

This would make sense with the breakout in BDI in late June  (see my prior blog posts in February and March) as well as the theory that the next step for China is to build out their rail system to connect their (ghost) cities and dramatically improve their distribution channel, connect people to jobs and lower costs.

If this move in commodities were to take place, we as investors, would want to establish positions in commodity futures and/or equity/producer names (or co

A plan, which on the surface, appears to be very Reaganesque and commendable however business (in my opinion) has mutated since the '80s and I immediately envision Congress ripping this to shreds eliminating the following:

• Eliminating tax loopholes while lowering the Corporate tax rate to a "fair" 28%  - seriously?  As if Corporations suddenly want to pay what someone may deem their  fair share?  It's all about profits baby and low-to-no taxes means profits.
• Removing incentives to relocate overseas.  Corporations have and will continue to shift their mfg to wherever costs are lowest.  What's he smoking and why isn't he sharing?

Give them incentives TO manufacture here (more tax breaks)

He also proposes the sale of America Fast Forward (AFF) bonds to attract private capital to invest in infrastructure investments.  This reminds me of the bonds which were sold in the 50's...........which I don't recall anyone raving about what a great investment they turned out to be.  Just say

We've already seen China build subdivisions, a mall, amusement park, a university and more, all sitting (essentially) empty so what is next?   For your consideration, this McKinsey video where their research shows that over the next 10 years, China plans to spend tens of billions of dollars building thousands of kilometers of metro lines to connect 35 cities (I wonder how many of those are currently ghost cities) which will not only transport people, but enormously improve efficiencies on shipment of goods.

I still remember being kept after class and having to clean the erasers, clouds of white dust billowing through the air leaving a film across my skin and causing me to cough like a three-pack-a-day smoker.  The smell is imbedded in my memory as if it as yesterday.   Boy are those days gone.

Fast forward to 2013 and not only are tablets and ipads becoming more prevalent in the classroom, but phones can share files with merely a touch and "the cloud" is only beginning to penetrate the education system, but what lies ahead for technology in the classroom?

For over a decade, the New Media Consortium (NMC) has been charting the landscape of emerging technologies in teaching, learning, and creative inquiry on a global scale.  Here are some quick insights....ALL within the next 4-5 years: (comments in italics mine)

• By the end of this year, the mobile market is expected to consist of over 7 billion accounts
• Mobile users will have downloaded 70 billion apps across smartphones and ta

As I read this morning's offering, I thought not of next week's trade or the possibility for growth next year but much further down the road.  I pondered the future for my children and my children's children.  All I have to say is I pray they stay in school. -kos

IBM's Ai project Watson “now applying for jobs at call centers, and getting them. In finance, and in law, and getting them.” - MIT’s Erik Brynjolfsson

When Growth Hits Zero

A Carter-era text called The Zero Sum ­Society, suggests a grim dystopia that emerges once economic growth hits zero point zero, at which moment to gain anything........................requires that you take it from somebody else. “Once you start to think about growth,” the Nobel laureate Robert Lucas has said, “it is hard to think about anything else.”

What if

The global economic slump that we have endured since 2008 might not merely be the consequence of the burst housing bubble, or financial entanglement and overreach, or the coming

During the last few years, a lot of hype has been heaped on the Brics (Brazil, Russia, India, China, and South Africa). With their large populations and rapid growth, these countries, so the argument goes, will soon become some of the largest economies in the world – and, in the case of China, the largest of all by as early as 2020. But the Brics, as well as many other emerging-market economies – have recently experienced a sharp economic slowdown. So, is the honeymoon over?

Brazil's GDP grew by only 1% last year, and may not grow by more than 2% this year, with its potential growth barely above 3%. Russia's economy may grow by barely 2% this year, with potential growth also at around 3%, despite oil prices being around $100 a barrel. India had a couple of years of strong growth recently (11.2% in 2010 and 7.7% in 2011) but slowed to 4% in 2012. China's economy grew by 10% a year for the last three decades, but slowed to 7.8% last year and risks a hard landing. And South Africa grew by

In an economy where a good percentage of jobs being added are part time or earning $7.50/hour, I always wondered when the spending would slow, or at least corporations' efforts to hide it from their earnings line via internal re-organization, share buybacks, exhausting inventories, etc would run their course........and that time may be upon us.  Consider that MCD is already running their wildly famous "Monopoly" game now, in July rather in it's typical October/November slot and you get an idea that they're doing whatever they can to rustle up business.    24/7 Wall Street is wondering if the party is over as well.  My question now is who's next?  Mid-level retailers?  Leisure and activities? 

After McDonald’s Corporation (NYSE: MCD) posted a disappointing company earnings report we can only yet again consider that perhaps the easy money has been made in the casual dining sector. Many of these stocks have run up and done incredibly well since the end of the recession and now the privat

As first reported by 9to5Mac, Apple has been bringing on board experts in sensors that monitor the human body. They’re from companies like AccuVein, C8 MediSensors and Senseonics.

The wearable technology market is expected to grow immensely in popularity in the next few years: one firm estimates the 500,000 smartwatches that have shipped so far this year will explode to 5 million units by the end of 2014. The optimism built into the numbers comes from the long-held assumption that Apple will do its own smartwatch. But lots of big consumer electronics companies will help bring the devices into the mainstream: that may include Microsoft, Motorola and Samsung, in addition to entries from smaller, niche companies like Pebble.

But wearable computing includes far more than watches. There’s Google Glass, of course, and simple fitness-tracking, wrist-worn devices like Nike’s, and products from Jawbone, Fitbit and others. Clothing with sensors in them will be part of the mix too, like Heapsyl

It's difficult to envision just where growth and expansion will come from today in a world of debt and low job growth however McKinsey offers these five (5) game changers:

• Shale-gas and -oil production. Powered by advances in horizontal drilling and hydraulic fracturing, the production of domestic shale gas and oil has grown more than 50 percent annually since 2007. The shale boom could add as much as $690 billion a year to GDP and create up to 1.7 million jobs across the economy by 2020. The impact will extend to energy-intensive manufacturing industries and beyond. The United States now has the potential to reduce net energy imports to zero—but only if it can successfully address the associated environmental risks. 
• US trade competitiveness in knowledge-intensive goods. The United States is one of the few advanced economies running a trade deficit in knowledge-intensive industries. But changing factor costs, a rebound in demand, and currency shifts are creating an opening to in

One of my favorite scans for a trade in the stock market is looking for setups with a tight Bollinger band squeeze with divergence (just ask our member Donald) but this end of month was different.  I was looking for confirmation of something more....ominous.

In case you missed it, the S&P500 exhibited a rare (and solid) piercing of the upper monthly Bollinger band in May which was met with immediate selling pressure.  To many technicians, merely piercing the upper band raises a warning flag as quite often it indicates the market will revert to the mean, or at a minimum the nearest support. 

The Bollinger band mantra goes something like this:

• Buy when the price falls below the lower Bollinger band
• Sell when the price pierces outside the upper Bollinger band

and boy......did they sell! 

I call it "rare" because normally price is contained within the Bollinger band and actually piercing the upper band with such severity only occurs every 5-10 years or more.  Of course a nays

With every pundit hitting the wires on his/her belief on why the market sold off, I began a list.  Remarks in italics mine:

• Second consecutive month for China's  PMI below 50; considered recession territory by most (we've been programmed to believe they'll always save us.)
• China's bonds reflect an increase in rates.
• Bernanke didn't increase QE.  (we want more!)
• Rates are going up (panic, run for the exits)
• We're beginning to "bake in" the Fed easing off the gas pedal (taper)
• Lack of confidence in the true strength of the US economy w/o QE
• Quadruple witching (Opex)
• Dollar strength will kill US export demand
• Japan's Abe needs to ease more (seriously?!)
• Next week is end of quarter (do you really want to show you went long AAPL this quarter?)
• 16x p/e is close enough for now
• Typical mean reversion
• 6-8% above a prior all-time high is typical to see massive profit taking
• Summer solstice (yeah, I know)
• Some UK banks are not meeting reserve requirements (fear of

Over the years, I've read over and over again that consolidations in an uptrend were a healthy phenomenon. Inability to break down meant investors (basically) have every faith in a companies abilities and find value at the current price.  After a consolidation (the longer the better) a move higher would come.  Let's look a few examples: (click all charts to enlarge)

AAPL is very well known for it's consolidations, or taking a "rest" before moving higher as this weekly chart reveals.  Investors clearly believed in their innovation and were willing to add to positions during these consolidation periods; thus holding up  the price and holding the range.   That's called appetite, right there.

In fact, the longer the consolidation, the greater the move holds true; especially when you take a look at the biotech ETF IBB.  After it's debut as a new ETF, investors found value in it at $40 and began to accumulate.  After a brief reversal up, held it in consolidation for an amazing eight year

I gleaned this from a twitter mention and after searching a bit, I found it in pdf form.  Ironic, I found it on a blog resource I sometimes frequent.  It is dry reading, but it is full of useful information.

http://csinvesting.org/wp-content/uploads/2012/07/analyzing_and_investing_in_community_bank_stocks.pdf

Is it possible we are in the early stages of an enormous secular stockmarket bull run?  We talk about this continually in Chat on StockBuz.

Since 1900, there have been four large stock market basing patterns which exceeded 12 years in length:

• 1906 to 1924—18 years
• 1929 to 1955—26 years
• 1966 to 1982—16 years
• 2000 to 2013—13 years

What prior breakouts had in common is investor behavior reflected an underlying distrust or disinterest and characterized by underinvestment in equities.  This results in a rebound that is relentless (emphasis mine), providing little opportunity to buy on pullbacks.  To put it bluntly, the distrust creates so many bears, that the inflow of bulls plows them over and with minimal pullback, they've forced to cover higher and higher...............fueling the market (my words - not in the article)

How and what caused those breakouts to sustain is a point of discussion in this Raymond James presentation  (courtesy of MarketFolly)

Also reviewed is

Anyone who knows me, knows I built a career mortgage services...........and that I now detest mortgage bankers.  It's not that they don't offer an invaluable service.  I cannot tell you the countless stories of homeowners who actually wept when informed of their loan's approval, brought me homemade cakes and mailed cards, even at Christmas.  Many returned to me years later when they "moved up" to a larger home or referred their family members directly to me which I felt was an enormous compliment; that they trusted their own son/daughter in my care.  It wasn't the lender they trusted.  It wasn't because we had the lowest rates in town.  It was my ability to package even the most complicated of circumstances, anticipate and document what would be required and steer them through the process with personal service and empathy they deserved.  I rarely made a sales call on a Realtor; maybe twice a year.  My flow was 95% referral and business was good; a fact I am to this day proud of.   It w

If you've never watched the iPhone release, it's well worth the time.  Just six short years ago (January 2007) Apple's Steve Jobs unveiled their first iPhone to a enthusiastic crowd at the Mac World Convention in San Francisco and blew away the phone industry.  By June, hundreds stood in lines outside of stores across the nation to get their hands on the hot, new innovative product.  Remember them camping out?  *lol*  People scrambled to save their pennies and begged Mom/Dad to get a piece of the "magic".  Here's a quick visual of AAPL's innovation and I realize I'm missing much but bear with me:

• 1984 MacIntosh which changed and challenged the entire computer industry.
• 2001 iPod transformed the music industry.  My own kids had one iPod after another.   As soon as a new one was announced, I knew what to add to their birthday/Christmas list.
• 2010 The iPhone which transformed phones (in my opinion).  This was the biggie which took an ipod style phone without keyboard buttons o

Steve Jobs had true vision and it's amazing and inspiring to see him in action.  Please take the time.  You'll be very glad you did.

"In an ideal world everyone would generate sufficient savings on their own to help fund their own retirement. However most of the data shows that Americans are simply unable to do this on their own. Nor is the current system of savings consisting of 401(k)s and IRAs doing the job either. The next few generations may now be facing increasingly difficult retirement scenarios. The question is whether instituting real changes now can help save future generations from a similar fate."  Read the full post @ Abnormal Returns

My knee-jerk reactions are several:

1. Tell this to a worker earning $7.50-10.00/hour paying $3.89/gallon for gasoline that he'll have no choice but contribute 9% pre-tax to a retirement account and the premise becomes something of an outrage.
2. I can see this already as yet another "account" which the US would borrow from a la Social Security (and still hasn't repaid).
3. It's yet another scheme to increase inflows into investment vehicles which obviously broker/de