Time to be bullish ?

Investors May Get Their Chance to Go Long as some think this is a good time to be bullish…

The summer might be ending, but the volatility continued yesterday, as shares prolonged the large gains made on Wednesday. And a late afternoon rally took prices towards the higher with the day almost at the final bell.

Economic reviews appeared to be the cause for the rally. Preliminary jobless claims for that week ended Aug. 28 came in at 472,000 versus an expected 475,000, and continuing statements fell to four.46 million from 4.48 million. Productivity in Q2 fell 1.8%, that is close to the prediction of 1.7%, and unit labor costs elevated 1.1% as expected. But pending home sales resulted in a very surprise — up 5.2% for that month exactly where analysts had anticipated no change. Factory orders for July increased .1% as opposed to an expected .3%.

Time to be Bullish?

Retail shares loved a strong session, climbing 2.2% subsequent a report of strong back-to-school product sales for August. Consumer discretionary shares gained one.8%, and industrials were up one.2%.

Alcoa Inc. (NYSE: AA) led the 30 Dow shares, up 2.85%, adopted by The home Depot, Inc. (NYSE: HD), up two.58%, and also the Boeing Business (NYSE: BA), up 2.1%.

The euro rose somewhat versus the dollar, and Treasuries fell again, bringing the 10-year note to a yield of 2.627%.

The Dow Jones Industrial Average rose 51 factors, closing at 10,320, the S&P 500 rose ten points, closing at one,090, and also the Nasdaq gained 23 factors at 2,200.

The NYSE traded 960 million shares with advancers ahead of decliners by two.5-to-1. On the Nasdaq, advancers had been ahead by 1.7-to-1 on volume of 463 million shares.

Time to be bullish?

Crude oil for October delivery rose $1.11 to $75.02 a barrel, and the Energy Select Sector SPDR (NYSE: XLE) closed at $53.55, up 44 cents.

September gold gained $5.20, closing at $1,251.50 an ounce, and the PHLX Gold/Silver Sector Index (NASDAQ: XAU) gained 2.15 points, closing at 186.41.

What the Markets Are Saying

In just two days shares have miraculously revived and vaulted to regain almost half of the losses of the entire month of August. And the S&P 500 sprang from the support zone at one,040 to 1,055 subsequent daily reversals and buy signals from our in-house indicator, the Collins-Bollinger Reversal (CBR)!!!

Thursday’s Daily Market Outlook gave several levels of the S&P as targets for that reversal: Fibonacci numbers: 50% = one,084, 61.8%=1,095, and then the 200-day moving typical at 1,115.

And, of course, there is the psychological resistance line at one,100, which may turn out to be the first stop for this rally. Not only is one,100 touted by the press as a barrier, but on eight days this yr it has halted short-term rallies, and in every case the failure to penetrate 1,100 led to a reversal and a test of support back towards the 1,040 – 1,055 support zone. This is not solid enough evidence to “bet the farm” on a reversal down from 1,100, but we should closely observe the tape action of the S&P 500 and be alert to the possibility of a reversal if it nears that mark.

Today is Friday, and that means a review with the sentiment indicators. Last week, the AAII bulls were at the lowest percent (20.74%) since July 7 at S&P 1,028. And July 7 marked the beginning of a five-week rally that took the S&P 500 to the top at one,129 on Aug. 9.

This week another with the important sentiment indicators, the Investors Intelligence Advisors Sentiment, showed a drop of bulls for that third consecutive week. They were 29.4% versus 33.3% a week ago, and 41.7% at the start of August. Both the AAII and also the Traders Intelligence reports are reverse indicators — a drop in sentiment for both is bullish for that markets. And the markets appropriately responded.

A very fine technician, Sam Turner, of RiverFront Investment Group, produced a study that appears to indicate that if the current rally follows the course of the two major reversals this yr, the slope with the resulting uptrends is important. He concludes that we should see a multi-week rally and the now familiar resistance at one,130 should again come into play by the end of September.

Well, it’s a long time between now and also the end of September, but we should keep the target in mind. Between now and 1,130 there could be many opportunities to pick up lengthy positions since the two prior bounces from 1,040 had many detours — one of which took us not to 1,040, but to the low of the year at one,011.

We will not be publishing the Daily Market Outlook on Monday, but next week I will continue our discussion of forming a clearly defined trading plan. Have a happy and safe ( bullish) holiday…

They have been provided with an opportunity to cut through the misogynistic absurdity and move around one fundamental purpose — to protect the US Taxpayer from ever again being the unwilling recipient of a financial raping of the magnitude that we experienced at the hands of America’s bankers in 2008.

In the 1930′s, in the wake of the 1929 crash as well as in the deep dark shadow of the Great Depression, other political figures were confronted with an equivalent option: Bow under the financial might of the big money crowd, or answer our nation’s call for safeguards against the rapacious predation of the American Banking elite.

What they did was answer that call by having an uncompromising finality that changed the face of banking permanently. They made the unpopular choice of forever (or so they believed) isolating commercial banking from investment banking.

Despite the fact that the bankers of the day howled that their earnings would take a hit and that credit could well be stymied, the politicians rose above the normal back room dealing so established within their world and said no more! Never again will you mercilessly plunder the public bank account!

And you know what? It did the trick!

Sure, there were booms and busts in the process, and banks got in trouble every now and then, but for 70 years we definitely avoided the kind of all encompassing wide spread breakdown that brought the United States to its knees in the 1930′s.

Those government bodies and political figures of the 1930′s weren’t hayseed apprentices. These were the men who took America through the agrarian age fully in to the industrial age. These were realistic, hard nosed business people who had looked deep and long into the abyss of the Great Depression and knew that it was in their own personal long-term best interest to cut the banks off from ever again using publicly insured money to finance their wild risk taking in the wall street game.

Utilizing that historical display of political will as our standard, we can clearly note that our generation’s chosen authorities have gone down far, far short of the mark.

I have read 100s of pages of paperwork concerning the brand new banking reform bill on the verge of being introduced into law, and I will tell you right this moment that it’s filled with more than enough ambiguities to generate loopholes large enough to drive a Mack truck through. Much of the enforcement of this new law, in reality, is discretionary and driven by a small number of people.

We’re left to rely upon the decryption of those policies by what amounts to a tiny cadre of financial bureaucrats. So we’ve gone from weakening the old 1930′s laws with the eradication of the up-tick rule as well as the repeal of the Glass-Steagall Act, to what might turn out to be a little gang of tight knit government bodies with Enormous DISCRETIONARY POWER.

What we will be looking at is the making of numerous so called “star chambers” that can potentially be converted into extremely powerful political weapons. All I see here is a group of hurdles set up to help keep things as they are. The large banking institutions have effectively caused it to be a lot more challenging for other finance institutions to realize the size essential to contend with all of them.

The banking power houses have effectively created a series of “pressure points” where they are able to apply their particular influence over a really small group of people to ensure that their particular challengers are kept at bay while their very own actions are kept off the radar. My friends, not a darn thing has evolved, and don’t let anybody tell you otherwise.

Volcker Rule

The so called Volcker Rule, which may have reinstated the most crucial provision of Glass-Steagall (namely, the separation of investment and commercial banking) was gutted. The thing that was left was a loophole-ridden joke. The headline legislation declares that only 3% of a bank’s capital can go to hedge funds and private equity, but in the small print they open the door to modifications after a study is produced by the Financial Stability Oversight Council.

Mmm, I wonder which way that review will go?

Derivatives

Here once again, the brand new guidelines on derivatives are blurry. The SEC and the CFTC will take over policing this area, and a central clearing house is going to be created to clear derivative trades. However, not all banks will be subject to the newest central clearing guidelines.

To the regulators’ credit, they’re making it mandatory that banks that don’t utilize the derivative clearing house need to enforce higher levels of margin, which is a good concept — but regarding just how much that margin is, who knows? I cannot obtain the number anywhere … if you already know it make sure you post it in the comment section, as I’d like to learn how much the banks will be required to put up.

Mortgage Companies

For a long time, mortgage companies underwrote bad loans, secure within the knowledge that they could get rid of them in to the mortgage backed security market. This, above all else, led to a glut of cheap money that fueled the real estate boom and drove housing prices up to unsustainable levels.

So how can we resolve that?

Well, the politicians are making it mandatory that the mortgage providers are only able to sell 95% of their loans, rather than 100%!! I have to admit, I chuckled when I read this! Do you really believe that 5% ownership can seriously be recognized as having “skin in the game”?

Nevertheless that’s the precise terminology the government is employing.

If you want to make certain that a mortgage company is going to underwrite good paper, wouldn’t you need to make sure they are holding a minimum of 30% of the mortgages that they underwrite with a mechanism in place that could offer them the cabability to loan more money on a sliding scale based on the delinquency rate of their loan portfolio?

The depressing news is the fact that it will likely be a long time before we know without a doubt whether or not these new rules are going to be successful or not.

But think about it: Do you believe that the authorities “watched your back” with these new rules, or did they “stab you in the back” instead?

I know how I feel, and I hope you’ll tell me what you think.

Eric LeRiche

http://www.InvestorRules.com

“Fool me once shame on you, fool me twice shame on me!”?

Unless you were already a sophisticated investor, I’m sure you suffered
some significant losses last year and I’m sure you’ve asked yourself: “what
could have I done and what can I do to avoid such a disaster if it happens
again?” Like most people you find yourself dependent on your financial
adviser who himself is dependent on the mutual funds he promotes.

Let me tell you what I think of mutual funds:

With more than 9,000 stocks to pick from, just how much is just too much?

I talk to so many investors/traders each day that tell me about their
particular “10 positions,” “20 positions,” “50 positions,” and even “100
positions.”

I get so irritated!

Come on, man, think it over!

Mutual funds have hundreds of positions. Their hope is to be diversified.

If the market rises then they might make 2-3%.
If the market goes up big then they can make 5-6%.
If the market decreases then the funds is going to be down 2-3%.
If the market crashes  then the funds will probably be down 5-6%.
If they break even then you just paid 1000s of dollars to have your
money do nothing at all.

This scenario used to seem sensible simply because, in the past, the market
has
constantly increased.

However, the stock market has evolved.

Computer trading currently makes up a tremendously large part of the
average daily trades.

2008 demonstrated that a decade could be wiped out in months.

The “fat finger” of 2010 demonstrated that many years may very well be
wiped out in minutes.

“Safe” became the new “Not really Safe.”

So, what do I think of mutual funds?

I do think they make sense for less than 20% of your savings and only if
you
can give them at the very least 10 years to run their course.

I think you may then take some risk capital and look to make a good
years % return for a mutual fund in a single trade.

You heard right, when you learn how to trade for yourself, it’s attainable
to
make 5-6% or more on a single trade.

Hype?

No.

As an example, last year my VIP portfolio members returned an average of
5,8% per trade and the average time to reach this yield was less than 2
months. So you see, I’m not saying you can make 5-6 % per year here. I’m,
saying you can make 5-6% per trade, in average since some will actually
lose money.

(if anybody tells you he/she doesn’t have any losing trades, run the other
way!)

Find out how I do it now.

Go to http://www.InvestorRules.com/VIP-Portfolio.html

The key to it all…

A Strong  Focus On Individual Stocks.

By channeling 2-3 stocks properly you can trade in your own world where
you
really rely on the individual stocks instead of the market as a whole.

Find out more now.

Go to http://www.InvestorRules.com/VIP-Portfolio.html

The more stocks you trade, the more you are trying to play the market as a
whole.

The less stocks you play, the more control you possess.

I observed a savvy student begin with $5,000 and turn it into $55K in
months by trading stocks in one sector.

Oftentimes, less really is more.

If I had to own 100 stocks for 10 years – I would just as soon have
somebody else take care of my money. At least then I would have somebody to
yell at!

But I don’t have to own one hundred stocks so I rely on myself personally.

I want to teach you how to rely on yourself now.

Go to http://www.InvestorRules.com/VIP-Portfolio.html

It begins by creating a good workable stocks to watch list, moves through
entry points and exit points and ends with you coming out on the other
side – in control.

To Your Success,

Eric LeRiche

P.S. This Is Not Your Average Stock Market Experience.

Traditional Wall Street analysts are insane. Not all of them, but the vast majority it seems. Either that, or maybe they are just fools.

I don’t care about tailored suits or impressive credentials or number-crunching prowess. A guy (or gal) can sport an expensive suit and a fancy pedigree and still be a dangerous idiot. (If the global financial crisis has taught us anything at all, hopefully it has at least taught us that.)

I bring up the above because it seems that, finally, we have some indisputable proof on our hands. It comes in the form of analyst ratings on British Petroleum (BP:NYSE) shares.

As of Wednesday, The Wall Street Journal reports, 34 analysts still maintained a “buy” rating on BP stock. Eight analysts had the guts to move BP to “hold,” and only one – just one! – put the stock at a sell.

I have just one question for the herd of “buy” rated analysts still bullish on BP stock:

“Are you insane?”

No Concept of Risk

Let us put aside, for a moment, the damfoolishness of maintaining a “buy” rating on a stock with gargantuan political risk.

If BP stock had even a 17% chance – a little over one in six – of getting cut in half or worse, I would not consider it an investment “buy” under any conceivable circumstance. That’s like playing Russian roulette with someone’s nest egg, is it not? Put the stock to your head, hope the bullet chamber is empty, and pray.

So, under normal circumstances, the gross lack of respect for risk embedded in Wall Street’s rating system would be bad enough.

But the situation here is actually far worse, because the odds of BP stock getting crushed by political risk – i.e. fallout from government fines and stratospheric cleanup costs – run much, much higher than 17%.

In fact, if BP’s all-in costs are not measured in the billions (or tens of billions) by the time this whole mess is over, I’ll eat my keyboard.

As I write to you, BP is executing a “Top Kill” operation to seal off the Deep Horizon well. The latest news, as of this writing, is that the wellhead has been “stabilized”… but it is still too early to call the operation a confirmed success. (The news may be different, for better or worse, by the time you read this.)

Pain No Matter What

If the “Top Kill” operation fails – and it still could – then BP is a dead duck. If the situation is as bad as oil expert Matt Simmons suggests, it might take nothing short of a nuclear bomb (yes, a nuclear bomb) to seal off the hole. More on that in a moment.

But even if the unprecedented operation to seal the well with mud and cement is a success, BP’s troubles are still just beginning. Men like Tony Buzbee will see to that.

And who is Tony Buzbee, you ask? Just a hungry Houston trial lawyer preparing to sue the living daylights out of BP.

“This is going to be the largest case in the history of the United States,” Buzbee says. “Even bigger than the tobacco cases. There will be thousands and thousands of cases.”

One of those cases, in fact, will probably be filed by Gary Burris, a local who has been working to help clean up the spill (given the absence of any fish to catch). As Louisiana news outlet WDSU.com reports:

Burris, a longtime fisherman who has worked across the Gulf Coast, said he woke up Sunday night feeling drugged and disoriented.

“It was like sniffing gasoline or something, and my ears are still popping,” Burris said. “I’m coughing up stuff. I feel real weak, tingling feelings.”

Marine toxicologist Riki Ott said the chemicals used by BP can wreak havoc on a person’s body and even lead to death.

“The volatile, organic carbons, they act like a narcotic on the brain,” Ott said. “At high concentrations, what we learned in Exxon Valdez from carcasses of harbor seals and sea otters, it actually fried the brain, (and there were) brain lesions.”

The chemical in question, an oil dispersant called Corexit, has long been banned in the United Kingdom for its link to health problems. What’s more, the U.S. Environmental Protection Agency (EPA) even demanded that BP stop using Corexit and switch to something less toxic – but BP refused.

And now, in addition to having their coastlines and day-to-day livelihoods destroyed, Gulf workers are getting sick. Is it any wonder trial lawyers are drooling?

Evidence of Negligence

Then, too, there are the smoking guns in respect to why the Deepwater Horizon disaster happened in the first place. Here are just a few points that scream “negligence,” as compiled by The Wall Street Journal:

• BP cut short a drilling procedure designed to detect gas in the well.
• BP skipped a quality test of the cement surrounding the pipe (another key safety measure).
• BP ignored warnings of a potential problem from contractor Halliburton.
• BP removed the heavy drilling fluid known as “mud” prematurely in order to save time.
• BP assigned an inexperienced manager with limited knowledge of deepwater drilling to the rig.
• BP ignored a major disagreement over safety procedures the day 11 people died.
• BP management overrode Transocean protests, taking unnecessary risks in order to save time.
• Subcontractor Kevin Senegal: “To me it looked like they were trying to rush everything.”

In addition to serving as red meat for ravenous trial lawyers, multiple points of negligence dramatically increase the odds of criminal or civil penalties being assessed against BP. That’s where the real financial carnage comes in.

“Running Into the Billions”

Professor David Uhlman, director of the University of Michigan Environmental Law program, agrees with your humble editor’s stark risk assessment as laid out last week. Total liability for BP “will run into the billions and maybe in the tens of billions,” Uhlman says.

While Reuters goes with a more conservative $10 billion figure in terms of outside risk to BP, the U.K. Guardian reports an outside range of $60 billion, based on a confidential U.S. source.

Keep in mind that the original estimate of 5,000 barrels per day in leakage is now widely acknowledged as a joke, with the possible long-run estimate being many multiples of that. The Exxon Valdez disaster was pegged at 11 million gallons. Rough estimates of the BP oil spill – so far – range from 19 million to 39 million gallons.

So far.

A Nuclear Solution

We can only hope that BP’s “Top Kill” solution actually holds… that promises of progress are not just more hot air… and that the wellhead is successfully sealed and remains sealed.

Otherwise, it might be “fire in the hole” – nuclear fire, that is.

“The thing we need to be terrified about,” said energy expert Matt Simmons via phone interview on The Dylan Ratigan Show, “is there might be no way to put this out other than waiting until the giant oil field depletes, which could take 9,000 days.”

Nine thousand days is a little over 24 and a half years.

If the well is indeed “unpluggable” – a possibility that would annihilate the $2.2 trillion Gulf economy, and virtually all Gulf of Mexico wildlife with it – the last-ditch solution would be to let the Navy “drop a bomb down the well bore and try to cave it in.”

A nuke would be novel, but not new. The Soviet Union has done this on at least five different occasions, the Russian daily Komsomolskaya Pravda reported some weeks ago. “Controlled nuclear blasts” – some larger than the Hiroshima bomb – were used by the Soviets to stop oil leaks underground, with the aim of squeezing off the flow via tons of compressed rock.

Can you imagine how that would go over for Americans though? A nuke in the ol’ backyard?

Let us hope against hope, for the sake of all involved, that the worst is over and that BP’s wellhead containment efforts are successful.

Of one thing we can be certain though: Whether the worst is over or far from over, the BP lawsuits and civil liability nightmares are just getting started. Your humble editor would still love to know what those 34 “buy” rated analysts are smoking.

Warm regards,

JL

This week is an options expiration week which typically has a positive bias. Statistically, Mondays also have a positive bias during the recent year. So it wouldn’t be a surprise if we get some sort of a rally on Monday. But look for more selling of the rally as the week goes on. At the same time, keep an eye on earnings from LOW on Monday, HPQ, HD and WMT on Tuesday, followed by AMAT and SNDK on Wednesday.
happy trading!!

New York Attorney General Andrew Cuomo’s office on Wednesday served subpoenas on four U.S. banks and four European lenders, the source said.

Cuomo is targeting Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs Group Inc, Morgan Stanley, UBS and Merrill Lynch, now owned by Bank of America, the source said.

The investigation comes as Wall Street and major banks around the world are attracting scrutiny from regulators stemming from transactions that occurred in the run-up to the subprime mortgage meltdown and financial crisis.

The Wall Street Journal on Wednesday reported that U.S. federal prosecutors, working with securities regulators, were conducting a preliminary criminal probe into whether four banks misled investors about their roles in mortgage bond deals.

The banks under early-stage criminal scrutiny are JPMorgan Chase, Citigroup, Deutsche Bank and UBS, the newspaper reported on its website, citing a person familiar with the matter.

The banks have also received civil subpoenas from the U.S. Securities and Exchanges Commission as part of a sweeping investigation of banks’ selling and trading of mortgage-related deals, the report said.

A spokesman for JPMorgan told the Journal the bank had not been contacted by federal prosecutors and was not aware of any criminal investigation. The other banks either declined comment or were not immediately available.

The reports come less than a month after the SEC charged Goldman Sachs with fraud over its marketing of a subprime mortgage product.

Federal investigators are also probing Morgan Stanley, The Wall Street Journal reported on Wednesday. The bank’s chief executive, James Gorman, said he had no knowledge of any such investigation.

The companies that rated the mortgage deals were McGraw-Hill Cos Inc’s Standard & Poor’s, Fitch Ratings and Moody’s Investors Service, a unit of Moody’s Corp.

The New York attorney general’s investigation was first reported by The New York Times.

Spokesmen for UBS and Deutsche Bank declined to comment, and a spokeswoman from Credit Agricole declined to comment on the New York Attorney General’s investigation. The other banks did not immediately return messages seeking comment.

I`d be careful going long on banks in general. Disclaimer: I own PUTS on Morgan Stanley because, in a nutshell,  whatever the outcome it is clear they will impose some kind of restrictions that will make it more difficult fr banks in general to make money thus one way or the other it`s not good news for the banks and as such I expect banks to take a hit.. But again, if the markets continue to be bullish they night dodge the bullet (again) so don`t go crazy on the Puts…

JMHO

Eric LeRiche

Investorrules.com

I wrote, “…resistance appears significant. Volatility (fear) is returning in a potentially big way. It’s not here yet; and that increases the likelihood of lower prices to come. Global markets are reflecting a reprise of contagion distress. I continue to suspect equities may remain under significant pressure, and seek out lower levels of support, over the weeks ahead.”

Thursday’s volatile action made it a bad day for many market participants, but not too shabby for you, if you are part of the VIP portfolio where you were protected with short positions

Black Thursday demonstrated how VIP portfolio keeps you a step ahead of the crowd. Five of my recos reached targets offering yields between 7 and 13% profits

The Superleverage power of my method was on display with:

MNTA hit its 2nd target at $12.96 for a 12.4% gain.
KND hit its 1st target at $16.44 for a 7.4% gain.
ABT hit its 2nd target at $47.02 for a 12.9% gain.

May 7th

BEC hit its 1st target at $59.95 for an 8.5% gain.
KND hit its 2nd target at $15.85 for a 10.7% gain.

…and each of them with an always known and strictly limited risk!

European finance ministers are meeting to work out a stabilization fund to try to abate the sovereign debt crisis…Sarnoff comment: Good luck.

You may hear talk of stabilization, and markets may try to snap back, especially today, but the overall character of the behavior of market price movement reflects instability and indicates the likelihood of lower prices down the road. Financials, in particular, look like they have more downside over the weeks ahead.

Trade safely

Eric LeRiche

www.InvestorRules.com

And all because “M” is just a hair too close to “B” on a standard American keyboard, we’re told.

The story goes that a trader at a major firm perhaps mistyped a trade as “billions” rather than “millions.” Word is the trader works (worked?) for Citi, which Citi promptly denied.

But on what stock did the fatal trade occur? Because there was more than one crazy drop:

* The accounting firm Accenture plunged briefly from $40 to $0.01
* IWD, an ETF tracking the Russell 1000, fell off a cliff from $61 to $0.09
* Procter & Gamble didn’t take nearly as big a fall — dropping to 37%, to $39 — but it’s a component of the Dow Jones industrials.

That was enough to trigger a wave of automated sell orders, pushing the Dow below 10,000. And once the 10,000 line was crossed, then a wave of automated buys kicked in.

Fun times, eh? Hope your retirement plans survived intact!

Eric$