Feb 14, 2011 - Issue #254

Egypt, Politics, and Debt

Egypt, politics, and debt.

CNBC & Fox News: A triple whammy the market must deal with.

Is this a scary market or what? Prices have gone up but volume has not.

CSCO crushed. MRK earnings fell 90% due to patent protection expiring with no new drugs in the pipeline. Many new upward support lines have been installed drawing the new battlelines.

Douglas Kass identifies four reasons market rally comes to a screeching halt:

Strategic investor Doug Kass, president of Seabreeze, is among those bears convinced the bulls are running with blinders.

"There’s simply no fear – the market is like a freight train with its intensity, unrelenting drive,” he says during a live interview on CNBC’s Fast Money. And he thinks the train is about to jump the tracks.

Here are the catalysts he expects will eventually send the market tumbling:

Submerging Markets - Kass believes that we’re seeing a clear break down in the EEM and says historically it’s been a harbinger of weakness in the American markets. “We’re seeing a great deal of outflows. “If the emerging markets are the world’s economic drivers, why are investors fleeing?”

Geopolitical Mess - The markets are simply ignoring the messy situation in Egypt, according to Kass. “I don’t see any easy solution to the spread of riot. And even when the dust settles he says “the new government of Egypt won’t be transformed into a Jeffersonian democracy.”

Raw Materials Inflation - Kass feels investors are ignoring the impact of higher input prices on profit margins. “Those that think that input costs can be passed on are a little too optimistic.”

Rising Interest Rates - The rate of the rise in bond yields may be nearing a tipping point, Kass says.

He's also concerned about "the regular pattern of lower futures in the morning followed by strength in the afternoon. We really have to watch if the train is going off the tracks."

Countdown till 2012 elections: 90 weeks.

Heads Up

W. D. Gann, a keen market observer, although not an astronomer, nevertheless, was fascinated by the apparent coincidence of important market 'pivot points' and astronomical dates. Theories exist for estimating time and price of important market turning points but astronomical occurrences are computed with mathematical certainty.

There is no logical reason why these occurrences should coincide yet, empirically, they have.

The 'Full Moon' and 'New Moon', among others, have been cited. Therefore, one might be well advised to be aware of their occurrence. Note: The first 5 business days of 2008 concluded on a 'New Moon' and we all know how that worked out. Coincidence?

2/2 Wednesday - New Moon.

2/18 Friday - Full Moon.

During the next two weeks, the following DJ-30 components report earnings. Keep a sharp eye out for possible price swings leading up to 'earnings day' (Subject to revision):

2/22 HD, HPQ, WMT (Bringing the Q410 DJ-30 earnings season to a close).

Dow score card for the week ending 2/11/11.

DJ-30: 12273.26 +181.11 +1.50%. The Real World (arithmetical) DJ-30: 54.04 +0.78 +1.46%.

UP: 21, Down: 9.

Trends (weekly charts): This is the subjective part.

Rising (Generally Higher Highs/Higher Lows) 14 (+4) 47%:

AA, +*AXP, CAT, DD, DIS, GE, +*HPQ, JPM, +*KO, +*MCD, +*MMM, +*TRV, +*UTX, +*VZ.

Consolidating (Generally Lower Highs/Higher Lows) 14 (-2) 47%:


Declining (Generally Lower Highs/Lower Lows) 2 (-2) 7%:


+/- denotes change of direction.

* denotes change of category.

Comments? Ideas? Feedback? Let me have it, right between the eyes! I'd love to hear from you. Just reply to this zine and tell me what you think!

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