The one guarantee

I guarantee you one thing. If you invest, at some point, you will be confused. This confusion is not by accident. It is caused by the mass quantities of conflicting financial information that swirls around the markets each day.  This financial information is designed to confuse you. Your response to it depends on who you are,  your level of expertise, and how close you monitor this information.  The better informed you are the more confused you get.

The prices that you see and the information that you hear, when combined, create a desire to respond.  Price and news motivate investors to buy and sell. The price confirms the news and the result is an ego based decision  to sell or buy.  Being right is what it is all about being right.  You keep score by making money,  The more money you make the smarter you are. This is a game for egomaniacs trying to prove themselves. 

You need to know one very important thing. The financial markets exist for one purpose. To raise capital for the system. The many financial advisers that you read reflect their own views of what is happening in the markets and many of these advisers have sponsors that have an agenda.  In order for prices to move higher the company needs a sponsor. A sponsor that can provide the capital necessary for the growth of the company.

The system has a set of marching orders. Those orders direct the capital that is created by either tax revenues, debt, or the trading profits by the central banks and governments of the world.  The insiders know those marching orders. Each quarter they get together and use the media and the price action to justify the direction of this new capital.  The news and price action you see are not an accident. They are the result of a planned process. This process rewards those in the financial markets that assist the flow of capital in the direction that is necessary to execute the financial plan.

The facilitators are the investment banks that convert the new funds created by the central banks by trading, taxes, and debt, into the capital that the corporations need to operate.  Goldman Sacs, Merrill Lynch, Morgan Stanley, Bear Stearns, Lehman Bros. were all major names that help direct funds in the past. The last 4 years has seen more direct intervention by the central banks in this process. The Glass Segal act that separated banks from investment firms was removed by the Fed and the result is a quicker method of directing the flow of funds.  Banks like Chase became the new Goldman. The result is that the private sector had their power reduced and the public sector assumed this responsibility.

The markets are designed for the pros to make money.  You are not a pro unless you understand what I have just told you. Being a pro is still not enough to make money long term. You need to have a disciplined approach to what appears to be price chaos.

I am not an insider and do not know what plans the Central banks have for us in the future. I am clueless and have only the  experiences of interacting with the financial markets for the past 35 years. That means I do not know what is going to happen. I can only guess, like most of us do, what the future holds.

The one way I can protect myself is by going in the direction of the flow of funds. This flow of funds is like a river with a current.  I want to swim in the direction of that current.  The current will change directions and I will change with it. I do not judge or argue with the direction I follow it.

The set of signals that you see in this blog are what I use to help me see the direction and speed of this current. The speed and direction can be measured and I have tools that help me monitor these currents. These currents can be measured by different time frames for  public participation,  direction  and volume.  The result of these measures give me clues to the underlying direction in that time frame. 

They say that in the markets you have the bulls, and the bears. The bulls think that the market is going up. The bears thing the market is going down. I believe that they are all squirrels because anyone that plays this game is nuts. You are much better off working hard saving your money and ignoring this circus. The best way to create wealth is to earn it and monitor how you spend it.

The problem is that corporations have abdicated their responsibility to their employees to manage money for the workers for retirement. In the past, pensions defined what a worker received on retirement. This created a liability for corporations for future payments to their retired employees.  The process began with the Regan/Greenspan era in the mid 80's. I was a broker at the time and was told then that the 401K would replace pensions as a retirement tool.  Why?  It released the liability of managing the retirement money from corporations and put it squarely on the shoulders of worker. 

This is the one of the most unfair moves in the history of this country. Workers are not capable of managing their retirement money. They are at the mercy of the army of financial advisers that swim like sharks in the financial waters.  The corporations could not manage the pension money to properly produce a retirement income so they said here you take it and if you fail its your fault.

These financial advisers are, for the most part, only salesman earning a commission.  They do not have the time or the ability to manage money.  They turn this responsibility over to the management professionals. You know, the mutual fund managers that were fired by the corporations because they underperformed and could not produce the results necessary fund a retirement pension. 

The managers usually under perform the averages but performs well enough to provide better than cash returns 95% of the time.  The problem comes when the investment cycle is over. The cycle ends the same way every time.  It ends with a crash. That crash wipes out all gains for everyone and we then start all over. The worker sees all of those gains evaporate in a very short period of time. He then has to decide what to do, play on or cut his losses.  Needless to say it is very demoralizing.

The question is play or not.  The answer is take a look around. Do you want to invest because rates are too low to make money?  Are you hearing other tell you that they are making alot of money?  If this is what is happening then the market is in a high risk area. This will not tell you when but it will tell you to start raising cash.

The way to tell when the cycle is over is to watch the yield on riskless investments.  The less it pays the higher the risk is stocks. Think low yields = high risk.  High yield  = low risk. The cycle ends with the public looking for ways to increase the yield on their 401k investments. You hear alot about high dividend payers at this point. You hear talk of early retirement. You see many financial adds on TV and you start thinking that  it is something that you should look into.

How do you know when to buy?  There has just been a financial disaster of some kind. You see and hear many people talking about how much money they lost. The financial advisers talk about safe investments with guarantees.  You do not care what your money is making you just want to be safe. You feel like you have just been fleeced and will never do it again. The Congress is looking for answers to why this happened and form blue ribbon committees solve the problem. You hear that the Central bank is saving the system by buying up everything that has just been dumped. They classic is they do it with printed money.  Sorry I digress.

The investment cycle is 1) crash 2) government intervention, 3) prices for assets drop dramatically and yields rocket higher for risk investment 4) public moves money to safe investment paying nothing 5) the Fed, and insiders come to the rescue and buys up the cheap riskier investments sold off by the public  5) Calm is restored and new laws are passed so it will never happen again 6) Prices stabilize and begin to climb for no apparent reason 7) Fed lowers rates on riskless investments  forcing public to move from safe to risk to earn anything 8) crash.

My job when I was a financial adviser was to point this out to my clients. I assure you that I lost most of my clients to high yield investment before the market crashed.  I am still doing this today but I blog and do not earn my living in the financial industry.  I realize that what is written in this blog makes no difference but it makes me feel better.   I am not sponsored by any group and have no hidden agenda. The approach that I take is what I do to deal with the realities of our financial system. It is a traders approach because I love the game and love to trade. 

Living in this country today means that you have tremendous opportunities but you must have an understanding our system or you may become a victim.

If you have questions about this process I have a twitter account @themarketshadow I will do my best to answer questions as honestly as I can.

Mikey

DJI Trend Summary
Daily Downtrend 13344 on 10-23 
Intermediate Downtrend  at 12400 on 11-7 2 days old
Long Term Uptrend 11315 on 11-1-10 2 years old
Last high 9-14 13653  Last Low  11-9 12743
20 day average rallies since downtrend began  0
50 day averge rallies since uptrend  began 0
IBD Market in correction 10-13 13344
 Long Term UP/ Intermediate Term Up/ Daily Trend Down/Short Term up
DJI Close 12815.39 +4.07
Step up range: 13043 - 13344
Current trading range 12743 - 13043
Step down support range 12300-12966

Average watch
50 Hour Ave: 13059 Price below
20 Day Ave: 13207 Price below
50 Day Ave: 13327 Price below (do not be long if this line is red)
20 Week Ave: 13168 Price below
50 Week Ave: 12881 Price below
200 Week Ave 10973 Price above


Overbought/Oversold Oscillator(Mikey reading) +150  to -150
Take profits  at +150 readings  buy or cover at -150 readings
3 day -136 OS  7 day -46 N 20 day +4 N  50 day +50
MACD Readings
MACD Crosses: Negative cross = consolidation/correction Positive cross=uptrend
Short term (50 hour) ,down (2 Hrs) signal 11-7
MACD Hourly -75.49
Daily trend (50 day) Down 12 days 10-23-12
MACD Daily -129.35 Negative cross 9-26
Intermediate trend (50 week) Down (3 days).signal 11-7 12400
MACD Weekly (+115.42) Negative cross  10-23-12
Long term trend (200 week) Up (23 months)...signal 12/1/10 11577
MACD Monthly (+519.83) Negative Cross 11/8/12.


Volume Readings
Volume (Millions) NYSE 3547  NASDAQ 1759
Advance/Decline NYSE -92 NASDAQ +19
Mikey NYSE A/D line +63203  Mikey NASDAQ A/D line -17402
Trader Psychology
Put/Call day 1.07 10 day .87 Put Prem/Call Prem  1.21 10 day 1.03
Bull/Bear Ratio 1.57  Bulls 43.6 %, Bears 27.7%
Mutial Funds Buy/Redeem ratio 1.15
VIX 18.61 VXZ 31.95 Trin  .83 10 day ave 1.24
Mikey Fear 86 (20 high, 80 low)
New Highs NYSE 72  NASDAQ 34  New Lows NYSE 88 NASDAQ 117
% Stocks above 200 day ave 53% (above 50% intermediate term uptrend)


Closing Prices
 
US Stocks
DJIA 12815.39 +4.07 S/P 500 1375.85 +2.34 NASDAQ 2904.87 +9.29  
DJT 5018.28 +35.99 DJU 448.11 -3.11
US Debt Markets
US Gov rates: 6 mo .1438% 2 yr .2736% 5 yr .6733% 10 yr 1.61% 30 yr  2.75
IEF (US 7-10 yr) 108.78 -.02 TLT (20 yr) 125.98 +.14 High Yield 91.39 -.16
MUB(NatMuni) 113.06 +.46 Cal Muni(NCA)10.52 -.12
BND Total Bnd Ind 84.90 -.11
Commodities 
CRB Commodities Index 292.22 +.35
Gold  1730.90 +4.90 Silver 32.9 +.36
Copper 3.44 -.02 Platinum 1559.40 +16.90
Oil 86.07 +.96   RBOB 2.69 +.08 Nat Gas 3.50 -.10
US Dollar Index and World Currencies
Euro 1.2623 -.0029  Pound 1.5729 .0074 Swiss Franc 1.0324 -,0027
Yen ..012349 -.000016 Aussie 1.0395 -.0016 Canadian Dollar  .9931 -.0010
Dollar Index 81.10 +.21
 
All Market Trends:


Commodities
Gold:      LongTerm/ Intermediate Term  Daily Trend// Short term
Silver:    Long Term / Intermediate Term/ Daily Trend / Short term
Copper  :Long Term/ Intermediate Term/ Daily Trend / Short term
Oil:         Long Term/ Intermediate Term/ Daily Trend / Short term
Gasoline Long Term/ Intermediate Term/ Daily Trend/  Short term
Nat Gas :Long Term/ Intermediate Term/ Daily Trend / Short term
CRB        Long Term/ Intermediate Term/ Daily Trend / Short term
Bond Markets
US Bonds LT Long Term/ Intermediate Term/ Daily Trend/  Short term
Intl  Treas       Long Term/ Intermediate Term/ Daily Trend /Short term
Intl Corp          Long Term/ Intermediate Term/ Daily Trend/ / Short term
US Muni        Long Term/ Intermediate Term/ Daily Trend   Short Trend
High Yield     Long Term/ Intermediate Term/ Daily Trend/ / Short term
Currencies
Aussie DollarLong Term/ Intermediate Term/ Daily Trend/ / Short term
Brit PD         Long Term/ Intermediate Term/ Daily Trend / Short term
Euro             Long Term/Intermediate Term/Daily Trend Short term
Yen               Long Term/ Intermediate Term/Daily Trend/  Short term
Swiss            Long Term/ Intermediate Term/ Daily Trend / Short term
Can Dollar   Long term/ Intermediate Term Daily Trend/ Short term
US Dollar   Long Term/ Intermediate Term/ Daily Trend / Short term
Stocks
US      Long Term/ Intermediate Term/ Daily Trend/  Short term
Europe Long Term/ Intermediate Term/ Daily Trend/ Short term
Germany Long Term/ Intermediate Term/ Daily Trend/ Short term
China     Long Term/ Intermediate Term Daily Trend/ / Short term
Brazil  Long Term/ Intermediate Term/ Daily Trend/ Short term
India   Long Term/ Intermediate Term/ Daily Trend/ Short term
Emerg Mkts   Long Term/ Intermediate Term/ Daily Trend/Short term
Japan Long Term/ Intermediate Term/ Daily Trend/ Short term