Hello my Investors, Traders and Readers friends. Thank you very much for all the comments and questions sent to me about my two main post yesterday. As usual, the current situation of the world economy and the stock market, generates a lot of anxiety, doubts and questions. I'll try to give my opinion most of these questions in the following 12 points:
1 .- When I say that the market is oversold, I mean who has fallen a lot in very little time or very quickly. If you analyze the main technical Indicators, may confirm this assertion.Obviously, this does not mean that the market can not continue to fall. However, it is reasonable to consider that the market should react and begin to rise.
2 .- However, the nature of this fall has been so important, we might expect the market reaction is only short term. Possibly, within the previous resistance level.
3 .- It is possible to make some trade in this upload? The answer is: probably yes. But be careful. First, this increase would occur only in the short term. Second, it should be given a very high level of volatility. Third, because we are facing a constant barrage of bad news, which may affect the market in the short term.
4 .- I think it is more reasonable than those who already have a long position, to sell during this rise and those looking for short operations, to locate good candidates.
5 .- It is possible that the market fall further? Of course yes. Let us not forget that the S & P downgrade was announced on Friday after the market had closed. And do not forget that we may have some resolution on Sunday on the debt issue in Europe. I think part of the trade in that situation would be very risky. Would only make sense for those who make day trades.
6 .- Traditionally, many investors do not like taking short positions. Many analysts andcommentators who constantly talk about the risks of short operations. I personally think that after the stock market falls of during the years 2000-2003 and 2007-2009,would be much more risky to stay with long positions during those periods.
7 .- The alternative is to time the market out and stay out of it until it begins to rise again, which is not very realistic. In general, there is much profit in those crashes that can be exploited by smart traders.
8 .- In the market there are various companies and people who analyze these alternatives. For example, The Market Trust has a Long-Short Portfolio.
9 .- It is true that the stock market is always looking surprised. It is also true that usually starts to rise when most analysts are with an opinion of the market downward, when the news is negative and when the perception is that the situation can get worse. Surely,on this occasion to pass the same. And it can happen now. However, usually before starting to rise, the market builds a base to support that growth. The construction of thebase takes time and usually comes accompanied by larger falls in prices.
10 .- For this reason is that I am of the opinion that the market may rebound in the shortterm, only to fall again ... and more significant ..
11 .- In this situation, it is vitally important to be very attentive to the next market moves.Surely there were important opportunities ... and we must be there to take them.
12 .- In my particular list of stocks, I have about 75 major short candidates if confirmed my perception of what can happen in the stock market. Watch for that to happen, I will share with you my thoughts on this specifically.
Sunday, August 7, 2011
The Stock for Today: Direxion Small Cap. Bear 3x TZA
Today I want to show you another important ETF: Direxion Small Cap. Bear 3x. (TZA). Friday, TZA made a new impressive breakout. This ETF closed in their highest level since December last year. Its price was $ 51.00 (+5.37%). Its volume was 41.44M shares, almost double its daily average. TZA behavior can complement the magnitude of fall that may occur in the stock market. Though it may be overbought at present, the levels of support it has generated can be considered very strong. This means that there could be a short term correction. But this does not invalidate the upward trend in the medium term. I think it is very important to look closely at this ETF for a broader perspective of the market situation and the depth of the current market crisis. Please click on the chart to enlarge.
US downgrade raises anxiety, if not interest rates
From Reuters
S&P downgrade will shake consumer and business confidence at a fragile time, economists say
, On Saturday August 6, 2011, 7:05 pm
WASHINGTON (AP) -- The real danger from the downgrade of U.S. government debt by Standard & Poor's isn't higher interest rates. It's the hit to the nation's fragile economic psyche and rattled financial markets.
S&P's decision to strip the U.S. of its sterling AAA credit rating for the first time and move it down one notch, to AA+, deals a blow to the confidence of consumers and businesses at a dangerous time, economists say.
The agency is "striking at the heart of what makes the global economy tick," says Chris Rupkey, chief financial economists for the Bank of Tokyo-Mitsubishi UFJ. "It isn't just dollars and cents."
One economist, Paul Dales of Capital Economics, worried Saturday that the downgrade could even trigger another financial crisis that sends Western economies back into a recession.
The timing could hardly be worse for the U.S. The economy added 117,000 jobs in July, more than expected. But other economic indicators, including manufacturing, consumer spending and overall growth, are getting weaker.
And the markets just came through their most harrowing two weeks since the financial crisis of 2008. The Dow lost about 10 percent of its value on fears of a new recession and Europe's spiraling financial problems.
In normal times, in another country, a downgrade in a country's sovereign debt rating probably would force its government to pay higher interest rates to convince investors to keep buying its debt.
If that happened, it would drive up the rates that consumers pay on mortgages and auto loans, which are often tied to the government's interest rate.
But the United States is a special case. Treasury debt is considered the safest investment in the world -- even after the downgrade. Investors don't doubt the U.S. government's ability to repay the $9.8 trillion it owes.
They also know they can easily buy and sell Treasury bills, notes and bonds. Rupkey calls Treasurys the "strongest, deepest, most liquid" market in the world.
"Anytime there's a problem anywhere on the planet, investors come to the safety of the U.S., and they don't go anywhere else," says Mark Zandi, chief economist at Moody's Analytics.
Despite worries about the U.S. government's huge debts and rumors of an impending downgrade from S&P, the yield on 10-year Treasury bonds was still a low 2.56 percent Friday.
That's because investors, worried about the weak U.S. economy and debt troubles in Europe, saw American bonds as a safer place to put their cash than, say, stocks.
"Where else are you going to put your money?" says Joe Libin, a Salt Lake City mortgage banker. "We're growing anemically. We've got a debt problem. But at least we're bobbing along. We're best-looking of the ugly kids at the prom."
U.S. banking regulators also moved quickly to reinforce the security of Treasury debt after S&P announced the downgrade Friday night. Regulators said they would continue to view Treasurys as a zero-risk investment and would not force banks to hold more capital against their Treasury investments.
There had been fears that some financial institutions with obligations to hold only top-rated investments might suddenly sell U.S. government debt on the open market -- forcing the price down and the yield up, and leading to higher interest rates.
The vote of confidence by the bank regulators lessens the risk. In addition, the other top rating agencies -- Moody's and Fitch Ratings -- have maintained top ratings on U.S. government debt.
The S&P downgrade also doesn't apply to short-term U.S. securities -- Treasury bills that mature in a year or less. It applies to government debt that matures in more than a year -- Treasury notes and bonds. That means the downgrade shouldn't rattle money market funds that invest in short-term Treasuries.
Mark Vitner, senior economist at Wells Fargo Securities, agrees that the S&P downgrade is unlikely to drive up interest rates right away. But he says that's partly because the economy is so weak that borrowers aren't competing for money and driving rates higher.
In three-to-five years, he says, loan demand will be higher. When that happens, a U.S. Treasury with a dinged credit rating will be vying with private borrowers for loans and investments, and rates will likely rise.
"The greater consequences are going to be in the intermediate and long-term," he says. "If it didn't mean anything, S&P wouldn't have downgraded us."
The Obama administration made its displeasure known quickly after the downgrade was announced. The Treasury Department said S&P had acted on an analysis that had a $2 trillion error.
On Saturday, the administration appeared to soften its tone. White House press secretary Jay Carney, without referring directly to the downgrade, said President Barack Obama believes Washington "must do better" tackling the federal budget deficits.
Already, there were signs that the downgrade itself would become a volatile political issue.
Senate Majority Leader Harry Reid, D-Nev., said the S&P decision showed that Democrats' preferred solution to long-term debt, a mix of tax increases on the wealthy and budget cuts, was the right answer.
House Speaker John Boehner, R-Ohio, said he hoped Democrats would learn they can't "tinker around the edges" of the U.S. debt problem. And Republican presidential candidates for 2012 laid blame on Obama.
S&P had called for $4 trillion in U.S. deficit reduction. The deal cut by Congress early last week called for only about $2 trillion over the next decade. S&P said it wasn't enough to address America's debt problem.
The rating agency also said the decision reflected its loss of confidence in the U.S. political system. Republicans and Democrats didn't reach a deal on debt reduction until hours before the federal government's borrowing limit was to expire, which would have triggered a U.S. default on its debt or massive, immediate government cuts.
Economists say the downgrade, the first since the U.S. received the top rating from S&P in 1941, will rattle consumers and businesses already worried about the weak economy and the U.S. political system's inability to handle the country's problems.
Some fear the Dow Jones industrial average, which fell 512 points on Thursday alone because of fears about the economy and Europe, will plummet Monday when investors get to vent their anxiety.
An early sign of what's to come may emerge Sunday evening in the United States when Asian markets open.
America's reputation has already taken a hit abroad. China, the largest foreign holder of U.S. debt, on Saturday demanded that the United States tighten its belt and overcome its "addiction to debt" in the wake of the S&P downgrade. China's central bank holds an estimated $1.16 trillion in U.S. debt.
The state-run Xinhua News Agency declared: "The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone."
"It's going to be tougher for the U.S. to attract capital," Vitner says. "If you're a business and you're deciding where to invest your earnings and investors' capital, you're looking around the world. The U.S. suddenly looks riskier."
Free Up Trend Stock Picks: DRV - SRTY - TZA
Direxion Daily Real Estate Bear 3x (DRV).- Price: US$ 16.49 (+7.36%). Vol: 2.01M shares (daily MA: 701K). Good breakout with high volume.
Proshares UltraPro Short Russell 2000 (SRTY).- Price: US$ 25.16 (+5.45%). Vol: 2.66M shares (daily MA: 879K). Double breaks with good volume.
Direxion Small Cap. Bear 3x (TZA).- Price: US$ 51.00 (+5.37%). Vol: 41.44M shares (daily MA: 19.74M). Good breakout with huge volume.
Proshares UltraPro Short Russell 2000 (SRTY).- Price: US$ 25.16 (+5.45%). Vol: 2.66M shares (daily MA: 879K). Double breaks with good volume.
Direxion Small Cap. Bear 3x (TZA).- Price: US$ 51.00 (+5.37%). Vol: 41.44M shares (daily MA: 19.74M). Good breakout with huge volume.
Free Down Trend Stock Picks: AIZ - DWA - SNDK
Assurant Inc. (AIZ).- Price: US$ 33.82 (-0.38%). Vol: 2.11M shares (daily MA: 1.03M). New low with high volume. Good entry point.
Dreamworks Animation (DWA).- Price: US$ 19.65 (-0.56%). Vol: 2.51M shares (daily MA: 1.60M). Restart a new leg down with nice volume.
Sandisk Corp. (SNDK).- Price: US$ 39.32 (-0.78%). Vol: 13.58M shares (daily MA: 7.81M). New Low with high volume.
Dreamworks Animation (DWA).- Price: US$ 19.65 (-0.56%). Vol: 2.51M shares (daily MA: 1.60M). Restart a new leg down with nice volume.
Sandisk Corp. (SNDK).- Price: US$ 39.32 (-0.78%). Vol: 13.58M shares (daily MA: 7.81M). New Low with high volume.
World leaders to confer on debt crises this weekend
From Reuters
By Paul Taylor and Melanie Lee
By Paul Taylor and Melanie Lee
PARIS/SHANGHAI (Reuters) - Global leaders on Saturday arranged a round of emergency calls to discuss the twin debt crises in Europe and the United States that are causing turmoil in financial markets.
The European Central Bank's policy-setting council will hold a rare Sunday conference call to talk about the euro zone problems, ECB sources said.
Markets are anxiously looking for the central bank to start buying Italian and Spanish debt on Monday to stabilize prices, a move that has split the ECB governing council.
But more pressure on the bonds of the two countries after last week's steep sell-off could undermine an already damaged European banking system and lock Italy, the world's eighth largest economy, out of the market.
Worsening the outlook was the Standard and Poor's downgrade of the U.S. sovereign credit rating late on Friday on concerns about its budget deficits and growing debt burden.
While not totally unexpected, the loss of top-tier AAA status by the world's economic superpower drew fierce criticism from China, a huge holder of U.S. debt, and promised more anxiety for global financial markets.
French President Nicolas Sarkozy, who heads the G20 group of the world's leading economies, will discuss the financial situation in light of the U.S. downgrade with British Prime Minister David Cameron on Saturday evening, his office said.
Finance ministers and central bankers of the G7 group of major industrialized nations will confer by telephone on Saturday or Sunday, a senior European diplomatic source said.
Their deputies from the broader G20 were due to hold a call on Saturday evening, a Brazilian finance ministry source said.
GRIDLOCK IN WASHINGTON
China bluntly criticized the United States after the S&P ratings cut to AA-plus, saying Washington had only itself to blame and calling for a new stable global reserve currency.
"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," China's official Xinhua news agency said in a commentary.
After a week which saw $2.5 trillion wiped off global markets, the S&P move deepened fears of an impending recession in the United States as euro zone countries struggle with a debt crisis of their own.
S&P blamed the downgrade in part on gridlock in Washington, saying politics was preventing steps to address the debt and deficit problems. Amid a vitriolic fight between Democrats and Republicans, U.S. lawmakers reached a last-minute debt deal last week to avoid an unprecedented default by the government.
President Barack Obama urged lawmakers to set aside partisan politics, saying they must work to put the nation's fiscal house in order and stimulate the stagnant economy. He called on Congress to give tax relief to the middle class, extend jobless benefits and pass long-delayed trade pacts.
The European source said the U.S. downgrade, added to the situation in Europe, raised the need for international policy coordination.
"The G7 will confer by telephone. It's not yet confirmed whether it will be in one stage or in two stages, tonight and tomorrow," the source said.
French Finance Minister Francois Baroin, who would chair any meeting under France's G7 and G20 presidency, said it was too soon to say whether there would be an early G7 gathering.
Dutch Finance Minister Jan Kees de Jager said: "I am in constant contact with colleagues in other countries and am following the development of the financial markets closely."
China and Japan have called for coordinated action to avert a new worldwide financial crisis. India's Finance Minister Pranab Mukherjee told reporters: "There is no need to unnecessarily press the panic button."
"DEBT ADDICTION"
Recrimination flew thick and fast among U.S. politicians, with each side seeking to blame the other for the downgrade and the impasse over how to solve the fiscal crisis.
Senator Jim Demint, a Republican, said Obama should demand the resignation of Treasury Secretary Timothy Geithner.
White House spokesman Jay Carney said Obama believes "it is important that our elected leaders come together to strengthen our economy and put our nation on a stronger fiscal footing."
Xinhua scorned the United States for a "debt addiction" and "short sighted" political wrangling. China, it said, "has every right now to demand the United States address its structural debt problems and ensure the safety of China's dollar assets."
"International supervision over the issue of U.S. dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country," Xinhua said.
In contrast, France's Baroin said France had faith in the United States to get out of this "difficult period." Friday's U.S. unemployment numbers were better than expected and so things were heading in the right direction, he said.
"One should not dramatize, one needs to remain cool-headed, one should look at the fundamentals," he told France's iTele.
"There is no need for panic," Polish Prime Minister Donald Tusk said. "We will see in August, and maybe more intensively in September what the effects for the world economy will be."
Because the S&P move was expected, the impact on markets may be modest when they reopen on Monday. But the ratings cut may have a long-term impact for U.S. standing in the world, the dollar's status and the global financial system.
"The consequence will be far reaching," said Ciaran O'Hagan, fixed income strategist at Societe Generale in Paris.
"It will weigh on secure assets. The bigger reaction will be on risky assets, including equities and on agencies (Freddie Mac, Fannie Mae) and states backed directly by the federal government."
But he added: "U.S. Treasuries will remain a benchmark. This is a ship which takes a long time to turn around."
Norbert Barthle, a budget expert for German Chancellor Angela Merkel's conservatives, said the downgrade would certainly provoke further turbulence in markets.
"I'm not surprised about the U.S. rating downgrade, rather I am astonished that, for weeks, international rating agencies have focused their attention on the European debt situation but not the American one," he said.
"For a while, there have been clear worries about America's economic woes but also the fact the U.S. is heavily indebted."
NO EARLY ITALIAN ELECTION
Italian Prime Minister Silvio Berlusconi on Saturday ruled out calling early elections to stem market panic that has pounded Italian assets and forced his government to bring forward austerity measures.
European policy makers are concerned that a debt emergency in the euro zone's third largest economy could completely overwhelm bailout mechanisms set up to help smaller troubled countries like Greece or Ireland.
Italy is due to go to the polls in 2013 but Berlusconi dismissed any suggestion of emulating Spain, where Prime Minister Jose Luis Rodriguez Zapatero has called an early election to tackle the crisis.
"This has absolutely not been talked about," Berlusconi told reporters. "This has never been an option."
The European Union's top economic official praised Italy's decision to accelerate budget-balancing measures and structural reforms and said swift implementation was now crucial.
"I strongly support this announcement and call on the authorities to quickly translate it into concrete measures," European Economic and Monetary Affairs Commissioner Olli Rehn told Reuters in a telephone interview.
The ECB sources said the central bank remains divided over whether to buy Italian government bonds but that even some of those who favor the move say Italy should do more to front-load austerity measures.
(Reporting by Isabel Versiani and Brian Winter in Brasilia, Laura MacInnis in Washington and other Reuters bureaux worldwide; Writing by Angus MacSwan and Stella Dawson; Editing by John O'Callaghan)
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