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Remember, the Money Has to Go Somewhere! - US Stock Market Update

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Posted by Peter Grandich - Grandich.com

on Friday, 02 March 2012 07:06

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"The Bank of Japan and The Bank of England are also flooding their markets with newly printed cash. And this week, in comments before Congress, Federal Reserve Chairman Ben Bernanke also signaled he has no intention of stemming the flood of easy money coming from his central bank." - Money and Markets

US Stock Market Update

by Peter Grandich

Despite numerous bearish long-term fundamentals, I’ve stated the market’s least resistance is up. While not a card-carrying member of the “Don’t Worry, Be Happy” crowd, I’ve managed to avoid taking any bearish strategies and thus not becoming part of the perma-bear carnage that has grown since the bottom in March 2009.

Having said that, I do think it’s time to start preparing for the top in this massive countertrend rally in a secular bear market that began back in late 2007. Somewhere between here and the marginal new, all-time high I suggested the DJIA could reach, I feel selling non-metals related shares seems wise. I would like to be mostly in cash (except for mining shares) before years-end.

I know the question many now have – what about resource stocks? Selling in May and going away may just be wise this year but for now, all systems remain go.

I do believe on the first news of a large-scale military conflict with Israel and Iran, we shall likely expedite any selling still left to do.

Stay tuned!

 

ABOUT PETER GRANDICH

Though he never finished high school, Peter Grandich entered Wall Street in the mid-1980s with no formal education or training and within three years was appointed Vice President of Investment Strategy for a leading New York Stock Exchange member firm. He would go on to hold positions as a Market Strategist, portfolio manager for four hedgefunds and a mutual fund that bared his name.

His abilities has resulted in hundreds of media interviews including GMA, Neil Cavuto’s Your World on Fox News, The Kudlow Report on CNBC, Wall Street Journal, Barron’s, Financial Post, Globe and Mail, US News & World Report, New York Times, Business Week, MarketWatch, Business News Network and dozens more. He’s spoken at investment conferences around the globe, edited numerous investment newsletters, and is one of the more sought after commentators.

Grandich is the founder of Grandich.com and Grandich Publications, LLC, and is editor of The Grandich Letter which was first published in 1984. On his internationally-followed blog, he comments daily about the world’s economies and financial markets and posts his views on social and political topics.  He also blogs about a variety of timely subjects of general interest and interweaves his unique brand of humor and every-man “Grandichism” expressions with his experience gained from more than 25 years in and around Wall Street. The result is an insightful and intuitive look at business, finances and the world, set in a vernacular that just about anyone can understand. In his first year, Grandich’s wildly-popular blog had more than one million views. Grandich also provides a variety of services to publicly-held corporations on a compensation basis.



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Small Cap Gold Stocks Successfully Retest 2010 Breakout

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Posted by Jordan Roy-Byrne - Trendsman

on Thursday, 01 March 2012 07:54

Juniors are typically micro-cap exploration companies. Yet, GDXJ the junior ETF is comprised of companies with market caps in the $500 Million to $1 Billion range. There is nothing junior about that. We notice there is a gap in terms of terminology. If Juniors are sub- $100 Million, and large caps are over $1 Billion, then what do you call those that fit the gap?

We prefer to use the term “established juniors” or small cap. After all, small caps by definition are in market cap between $100 Million and $1 Billion. These terms are most appropriate for those in the middle of said range rather than the bottom or top. We prefer the established juniors as being established (which is open to interpretation) they have less risk than the true juniors and if successful can grow to $1 Billion or more in capitalization.

In our opinion, small caps are the area to focus on as they have a much greater likelihood of growth and leverage to Gold than the large producers. Historically, the large producers do not outperform Gold on a consistent basis. The law of numbers combined with the difficulty of the mining business explains why.

Our junior/small cap index consists of 20 stocks equally weighted with a median market cap of about 600 Million. In the second half of 2010 the market broke to new highs for the first time since 2007. With every breakout comes a retest. Heading into 2011 we predicted the retest would last into the summer. The retest lasted the entire year but appears to be successful.

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Our bet is that the small caps will work their way back to the high before the end of the summer. It will take the time to overcome resistance but the trend will remain higher. If and when the market makes a new all-time high it will be very bullish for several reasons. It would be the first sustained breakout to a new all-time high since 2005-2006. It would come at a time when the bull market is starting to transition out of the wall of worry phase. Finally, it would generate significant momentum when overhead resistance is basically nil.

This is possible due to a combination of Gold rising and present low valuations improving. In the next chart we graph our index and the ratio of our index to Gold. Gold companies are generating record profits and the price of Gold is near its all-time high yet leveraged small caps are trading near a low relative to Gold. That, in our view is a function of market sentiment and evidence of the wall of worry stage.

gold-stocks-28-2

f the ratio would rise back to its 2007 and 2010 highs at 0.065 and Gold would reach $2000, our small cap index would just about double. That is right, a potential 100% gain.

The bottom line is small cap gold stocks have completed a textbook breakout and retest. As we said, the market will likely have a hard slog for the next several months as it encounters supply from the 2011 correction. If and when the market nears its old high it will have built up the necessary strength and momentum to embark on an explosive breakout. Thus, now is the time to be doing your due diligence to find and research those candidates to lead the market in a potential rip roaring move into 2013.



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Jeremy Grantham: 10 Investment Lessons

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Posted by Jeremy Grantham -GMO

on Tuesday, 28 February 2012 02:14

Warren Buffett has said that if you look around the poker table and you can’t spot the patsy, you’re it. In that spirit, another famed investor, Jeremy Grantham, is trying to deal investors a better hand.

Jeremy Grantham is a British investor and Co-founder and Chief Investment Strategist of Grantham Mayo Van Otterloo (GMO), a Boston-based asset management firm. GMO is one of the largest managers of such funds in the world, having more than US $107 billion in assets under management as of December 2010. Grantham is regarded as a highly knowledgeable investor in various stock, bond, and commodity markets, and is particularly noted for his prediction of various bubbles.

Grantham doesn’t mince words. In Grantham’s view, outlined in a quarterly letter published late Friday, individuals launched into the market have embarked on “dangerous investment voyages” that threaten to separate them from their money. They hear the tempting call of countless stock-market sirens — self-interested cheerleaders and barkers who promise that it’s different this time, and that you must buy now or miss the boat.

Making the journey even more perilous is that stocks around the world are either fairly priced or nearly so, he says. Investors who buy now can expect meager returns over the next seven years.

....read Grantham's detailed version of the 10 Investment Lessons:  HERE - The Longest Quarterly Letter Ever.'

Here is a summarized version of the 10 Investment Lessons:

1. Believe in history
“All bubbles break; all investment frenzies pass. The market is gloriously inefficient and wanders far from fair price, but eventually, after breaking your heart and your patience … it will go back to fair value. Your task is to survive until that happens.”

2. ‘Neither a lender nor a borrower be’
“Leverage reduces the investor’s critical asset: patience. It encourages financial aggressiveness, recklessness and greed.”

3. Don’t put all of your treasure in one boat
“The more investments you have and the more different they are, the more likely you are to survive those critical periods when your big bets move against you.”

4. Be patient and focus on the long term
“Wait for the good cards this will be your margin of safety.”

5. Recognize your advantages over the professionals
“The individual is far better positioned to wait patiently for the right pitch while paying no regard to what others are doing.”

6. Try to contain natural optimism
“Optimism is a lousy investment strategy”

7. On rare occasions, try hard to be brave
“If the numbers tell you it’s a real outlier of a mispriced market, grit your teeth and go for it.”

8. Resist the crowd; cherish numbers only
“Ignore especially the short-term news. The ebb and flow of economic and political news is irrelevant. Do your own simple measurements of value or find a reliable source.”

9. In the end it’s quite simple. really
Estimates and forecasts such as the ones GMO makes for the next seven years aren’t complicated, Grantham says - “[GMO] estimates are not about nuances or Ph.D.s. They are about ignoring the crowd, working out simple ratios and being patient.”

10. ‘This above all: To thine own self be true’
“It is utterly imperative that you know your limitations as well as your strengths and weaknesses. You must know your pain and patience thresholds accurately and not play over your head. If you cannot resist temptation, you absolutely must not manage your own money.”


MW-AM703 granth 20110913184921 MO

Jeremy Grantham is a British investor and Co-founder and Chief Investment Strategist of Grantham Mayo Van Otterloo (GMO), a Boston-based asset management firm. GMO is one of the largest managers of such funds in the world, having more than US $107 billion in assets under management as of December 2010. Grantham is regarded as a highly knowledgeable investor in various stock, bond, and commodity markets, and is particularly noted for his prediction of various bubbles.

Estimates and forecasts such as the ones GMO makes for the next seven years aren’t complicated, Grantham says



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On the Cusp: Historically Profitable Seasonality moves for US & CDN Markets Imminent

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Posted by Don Vialoux: Timing the Market

on Monday, 27 February 2012 05:45

Ed Note: Dodging Overbought status, Don Vialoux's seasonality studies aim at profiting through Historically reliable patterns (detailed definition HERE). Right now EquityClock says  "Seasonal influences on equity markets turn positive in March. They tend to strength as the month progresses." The TSE tracks the S&P 500 well. All the World's Major indices charts and commentary are below:

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Screen shot 2012-02-27 at 3.10.45 AM

Macro events will continue to influence equity markets this week. The G20 Meeting of Finance Ministers was held in Mexico over the weekend. The focus is on European sovereign debt. Germany’s Parliament discusses the Greek bailout program on Monday. The European consumer confidence and industrial confidence indices are released on Tuesday. Federal Reserve Chairman Ben Bernanke delivers the Semi-annual Monetary Report on Wednesday. China and Euro announce their February Purchasing Managers indices on Thursday. Europe’s unemployment rate is released on Thursday. Russia’s Presidential election is held next Sunday.

Economic news this week is expected to be mixed to slightly negative, breaking a string of economic reports that have encouraged investor confidence. Click HERE for Economic & Earnings News Schedule for this coming week.

The earnings focus this week is on Canada’s banks (scroll down HERE  for the Schedule). Fourth quarter reports from the U.S. are winding down. A total of 463 S&P 500 companies have reported to date. 59% have exceeded consensus versus an average of 62% in recent quarters. A total of 104 S&P 500 companies have offered first quarter guidance with 31 companies guiding higher and 64 companies guiding lower.
Short and intermediate technical indicators remain overbought in a wide variety of equity markets and sectors. Fewer sectors are leading the advance.
Cash on the sidelines remains substantial and is unlikely to trend lower until equity markets determine who the next U.S. President will be.

Equity Trends

The S&P 500 Index gained 4.51 points (0.33%) last week. Intermediate trend is up. The Index remains well above its 50 and 200 day moving averages. Short term momentum indicators are overbought and showing early signs of peaking. Short term momentum indicators are not useful until the short term trend line is broken.

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Percent of S&P 500 stocks trading above their 50 day moving average slipped last week from 86.60% to 83.20%. Percent is intermediate overbought and peaked three weeks ago.

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The TSX Composite Index gained 267.47 points (2.15%) last week. Intermediate trend is up. The Index broke above resistance at 12,623.98. Support is at 11,420.78. The Index remains above its 50 day moving average and broke above its 200 day moving average last week. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to the S&P 500 Index is turning positive. ‘Tis the season for the TSX to outperform the S&P 500 Index!

tse227

Percent of TSX Composite stocks trading above their 50 day moving average increased last week from 60.08% to 68.38%. Percent remains intermediate overbought.

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The Shanghai Composite Index gained 66.45 points (2.82%) last week. Intermediate trend is down. Support is at 2,132.63 and resistance is at 2,536.78. The Index trades above its 50 day moving average, but remains below its 200 day moving average. Short term momentum indicators are overbought, but continue to trend higher. Strength relative to the S&P 500 Index remains positive. ‘Tis the season for the Index to move higher!

Shanghai

The Dow Jones Industrial Average added 33.08 points (0.26%) last week. Intermediate trend is up. The Average trades well above its 50 and 200 day moving averages. Short term momentum indicators are overbought and showing early signs of peaking. However, short term momentum indicators are not meaningful until short term uptrend in the Average is broken. Strength relative to the S&P 500 Index remains negative.

DJIU

The Dow Jones Transportation Average fell 100.38 points (1.92%) last week. Intermediate trend is up. Support is at 4,531.79 and resistance has formed at 5,384.15. The Average has broken below a rising wedge pattern. The Average trades above its 200 day moving average, but fell below its 50 day moving average on Friday. Short term momentum indicators continue to trend down. Strength relative to the S&P 500 Index remains negative.

DJIT

The NASDAQ Composite Index added 11.97 points (0.41%) last week. Intermediate trend is up. Support is at 2,441.48. The Index trades well above its 50 and 200 day moving averages. Short term momentum indicators are overbought and showing early signs of peaking. Significant momentum sell signals will occur when short term uptrend of the Index is broken. Strength relative to the S&P 500 Index remains positive.

Nasd

The London FT Index added 30.06 points (0.51%), the Frankfurt DAX improved 16.40 points (0.24%) and the Paris CAC Index gained 27.41 points (0.80%) last week.

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dax

cac

The Athens Index plunged 74.57 points (9.05%) last week. Investors are skeptical that the agreement on sovereign debt will last. Resistance is forming at 843.64. Short term momentum indicators are trending down. Strength relative to the S&P 500 Index has returned negative.

greece

The Nikkei Average gained 263.21 points (2.80%) last week. Intermediate trend is up. The Average trades well above its 50 and 200 day moving averages. Short term momentum indicators are overbought, but continue to trend higher. Strength relative to the S&P 500 Index remains positive. ‘Tis the season for the Nikkei Average to move higher!

Nikkei

The Australia All Ordinaries Composite Index added 115.74 points (2.71%) last week. Intermediate trend is up. Support is at 3,905.20 and resistance is at 4,472.20. The Index recently bounced from its 50 day moving average and broke above its 200 day moving average last week. Short term momentum indicators continue to trend higher. Strength relative to the S&P 500 Index remains negative.

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Other Factors

The VIX Index slipped 0.47 (2.64%) last week. Once again, it is testing long term support near 15.00.

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.....to view 30 more Charts for Currencies, Commodities and Interest Rates go HERE. Don & Jon Vialoux's Equityclock.com is offering free access to a data base showing seasonal studies on individual stocks and sectors. The data base holds seasonality studies on over 1000 big and moderate cap securities and indices.
To login, simply go to http://www.equityclock.com/charts/



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Stocks & Equities

Economic & Earnings News Schedule for week beginning Feb 27th/2012

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Posted by Tech Talk

on Monday, 27 February 2012 04:27

Economic News This Week

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Earnings Reports This Week

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