Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, provides below further reformatted and edited [..] excerpts from Gonzalo Lira’s (http://gonzalolira.blogspot.com) original article* for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) Lira goes on to say:

Why? Because the economy is in no better shape than it was in September 2008—and both the Federal Reserve and the Federal government have shot their wad. They got nothin’ left after [spending] trillions in stimulus and trillions more in balance sheet expansion. [The only thing] they have accomplished… is to undermine Treasuries… [to make] Treasuries… the New and Improved Toxic Asset. Everyone knows that they are overvalued, everyone knows their yields are absurd—yet everyone tiptoes around that truth as delicately as if it were a bomb. Which is actually what it is.

[The above being the case,] the Fed has bought up assets of all kinds, in order to inject liquidity into the system, and bouy asset price levels so as to prevent this deflationary deep-freeze… but this Fed policy—call it “money-printing”, call it “liquidity injections”, call it “asset price stabilization”—has been overwhelmed by the credit contraction… [in spite of] expanding its balance sheet from some $900 billion in the Fall of ’08, to about $2.3 trillion today. [While it is true that] the Fed has been able to alleviate the worst effects of the deflation, it has not turned the deflationary environment into anything resembling inflation. Yields are low, unemployment up, CPI numbers are down (and under some metrics, negative)—in short, everything screams “deflation”. Therefore, the notion of talking about hyperinflation now, in this current macro-economic environment, would seem . . . well . . . crazy. Right? Wrong! I would argue that the next step down… will be hyperinflation.

Most people dismiss the very notion of hyperinflation occurring in the United States as something only tin-foil hatters, gold-bugs, and right-wing survivalists drool about. In fact, most sensible people don’t even bother arguing the issue at all – everyone knows that only fools bother arguing with a bigger fool. [Nevertheless,] a minority actually do go ahead and go through the motions of talking to the crazies ranting about hyperinflation. These amiable souls diligently point out that in a deflationary environment where commodity prices are more or less stable – there are downward pressures on wages, asset prices are falling, and credit markets are shrinking – inflation is impossible [and,] therefore, hyperinflation is even more impossible.

What Hyperinflation is NOT
The [above] outlook seems sensible if we fall for the trap of thinking that hyperinflation is an extention of inflation. If we think that hyperinflation is simply inflation on steroids… then it would seem to be the case that, in our current deflationary economic environment, hyperinflation is not simply a long way off, but flat-out ridiculous [to even contemplate] but hyperinflation is not an extension or amplification of inflation. Inflation and hyperinflation are two very distinct animals. They look the same because in both cases the currency loses its purchasing power but they are not the same.

What (Hyper)inflation IS
Inflation is when the economy overheats. It’s when an economy’s consumables (labor and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomena.

Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money [but that] they want less of the currency [and, as such,] they will pay anything for a good which is not the currency.

The Current Situation
Right now, the U.S. government is indebted to about 100% of GDP, with a yearly fiscal deficit of about 10% of GDP, and no end in sight. For its part, the Federal Reserve is purchasing Treasuries, in order to finance the fiscal shortfall, both directly (the recently unveiled QE-lite) and indirectly (through the Too-Big-To-Fail banks). The Fed is satisfying two objectives: One, supporting the government in its efforts to maintain aggregate demand levels, and two, supporting asset prices, and thereby prevent further deflationary erosion. The Fed is calculating that either path—increase in aggregate demand levels or increase in aggregate asset values—leads to the same thing: A recovery in the economy.

A recovery [in the economy] is not going to happen—that’s the news we’ve been getting as of late. Amid all this hopeful talk about “avoiding a double-dip”, it turns out that we didn’t avoid a double-dip—we never really managed to claw our way out of the first dip. No matter all the stimulus, no matter all the alphabet-soup liquidity windows over the past 2 years, the inescapable fact is that the economy has been, and is, headed down.

How Hyperinflation Will Happen
1. One day… there will be a commodities burp – a slight but sudden rise in the price of a necessary commodity, such as oil.

2. This will jiggle Treasury yields, as asset managers reduce their Treasury allocations and go into the pressured commodity, in order to catch a profit. (Actually it won’t even be the asset managers – it will be their programmed trades – and these asset managers will sell Treasuries because, effectively, it has become the principal asset they have to sell.)

3. Bernanke and the Fed will buy Treasuries, in an effort to counteract the sell-off and maintain low yields in order to discourage deflation.

4. The Fed’s buying of Treasuries will occur in such a way that it will encourage asset managers to dump even more Treasuries into the Fed’s waiting arms. This dumping of Treasuries won’t be out of fear, at least not initially. Most likely, in the first 15 minutes or so of this event, the sell-off in Treasuries will be orderly, and carried out with the idea (at the time) of picking up those self-same Treasuries a bit cheaper down the line.

5. The Fed will interpret this sell-off as a run on Treasuries (the Fed is already attuned to the bond markets’ fear that there is a “Treasury bubble” so the Fed will open its liquidity windows, and buy up every Treasury in sight, precisely so as to maintain “asset price stability” and “calm the markets”.

6. The Too-Big-To-Fail (TBTF) banks will play a crucial part in this game. Seeing this run on Treasuries, will add to the panic by acting in their own best interests. They will be among the first to step off Treasuries. They will be the bleeding edge of the wave.

7. Here the panic phase of the event begins. Asset managers, on seeing this massive Fed buy of Treasuries and the TBTF banks selling Treasuries, will dump their own Treasuries en masse. They will be aware how precarious the U.S. economy is, how over-indebted the government is, how U.S. Treasuries look a lot like Greek debt. They’re not stupid: Everyone is aware of the idea of a “Treasury bubble” making the rounds… so when the Fed begins buying Treasuries full-blast to prop up their prices, these asset managers will all decide, “Time to get out of Dodge—now.”

Note how it will not be China or Japan who all of a sudden decide to get out of Treasuries—those two countries will actually be left holding the bag. Rather, it will be American and (depending on the time of day when the event happens) European asset managers who get out of Treasuries first. It will be a flash panic—much like the flash-crash of last May. The events I describe above will happen in a very short span of time—less than an hour, probably – but unlike the event in May, there will be no rebound.

Notice, too, that Treasuries will maintain their yields in the face of this sell-off, at least initially. Why? Because the Fed, so determined to maintain “price stability”, will at first prevent yields from widening—which is precisely why so many will decide to sell into the panic. The Bernanke Backstop won’t soothe the markets—rather, it will make it too tempting not to sell.

8. The first of the asset managers or TBTF banks who are out of Treasuries will look for a place to park their cash – and they will go to commodities. By the end of that terrible day, commodites of all stripes—precious and industrial metals, oil, foodstuffs—will shoot the moon. It will not happen because ordinary citizens have lost faith in the dollar (that will happen in the days and weeks ahead) but because, once Treasuries are not the sure store of value, commodities will be perceived as the only sure store of value.

It won’t be commodity ETF’s, or derivatives—those will be dismissed (rightfully) as being even less safe than Treasuries. Unlike before the Fall of ’08, this go-around, people will pay attention to counterparty risk. So the run on commodities will be for actual, feel-it-’cause-it’s-there commodities. By the end of the day of this panic, commodities will have risen between 50% and 100%. By week’s end, we’re talking 150% to 250%. (My private guess is gold will be finessed, but silver will shoot up the most—to $100 an ounce within the week.)

9. Of course, once commodities start to balloon ordinary citizens will get their first taste of hyperinflation. They’ll see it at the gas pumps. If oil spikes from $74 to $150 in a day, and then to $300 in a matter of a week—perfectly possible, in the midst of a panic—the gallon of gasoline will go to, what: $10? $15? $20?

So what happens then? People—regular Main Street people—will be crazy to buy up commodities (heating oil, food, gasoline, whatever) and buy them now while they are still more-or-less affordable, rather than later, when that $15 gallon of gas shoots to $30 per gallon.

10. If everyone decides at roughly the same time to exchange one good—currency—for another good—commodities—what happens to the relative price of one and the relative value of the other? Easy: One soars, the other collapses. When people freak out and begin panic-buying basic commodities, their ordinary financial assets—equities, bonds, etc.—will collapse: Everyone will be rushing to get cash, so as to turn around and buy commodities. So immediately after the Treasury markets tank, equities will fall catastrophically, probably within the next few days following the Treasury panic. This collapse in equity prices will bring an equivalent burst in commodity prices—the second leg up, if you will.

11. This sell-off of assets in pursuit of commodities will be self-reinforcing: There won’t be anything to stop it. As it spills over into the everyday economy, regular people will panic and start unloading hard assets—durable goods, cars and trucks, houses—in order to get commodities, principally heating oil, gas and foodstuffs. In other words, real-world assets will not appreciate or even hold their value, when the hyperinflation comes.

This is something hyperinflationist-skeptics never quite seem to grasp: In hyperinflation, asset prices don’t skyrocket—they collapse, both nominally and in relation to consumable commodities. A $300,000 house falls to $60,000 or less, or better yet, 50 ounces of silver—because in a hyperinflationist episode, a house is worthless, whereas 50 bits of silver can actually buy you stuff you might need.

Neither the Federal Government Nor the Federal Reserve Will Be Able to Curtail Hyperinflation
Right now, I’m guessing that sensible people who’ve read this far are dismissing me as being full of shit—or at least victim of my own imagination. These sensible people, if they deign to engage in the scenario I’ve outlined above, will argue that the government—be it the Fed or the Treasury or a combination thereof—will find a way to stem the panic in Treasuries (if there ever is one), and put a stop to hyperinflation (if such a foolish and outlandish notion ever came to pass in America).

Uh-huh: So the Government will save us, is that it? Okay, so then my question is, How?

Let’s take the Fed: How could they stop a run on Treasuries? Answer: They can’t. See, the Fed has already been shoring up Treasuries—that was their strategy in 2008—’09: Buy up toxic assets from the TBTF banks, and have them turn around and buy Treasuries instead, all the while carefully monitoring Treasuries for signs of weakness. If Treasuries now turn toxic, what’s the Fed supposed to do? Bernanke long ago ran out of ammo: He’s just waving an empty gun around. If there’s a run on Treasuries, and he starts buying them to prop them up, it will only give incentive to other Treasury holders to get out now while the getting’s still good. If everyone decides to get out of Treasuries, then Bernanke and the Fed can do absolutely nothing effective. They’re at the mercy of events—in fact, they have been for quite a while already. They just haven’t realized it.

Well if the Fed can’t stop this, how about the Federal government—surely they can stop this, right?

In a word, no. They certainly lack the means to prevent a run on Treasuries. As to hyperinflation, what exactly would the Federal government do to stop it? Implement price controls? That will only give rise to a rampant black market. Put soldiers out on the street? America is too big. Squirt out more “stimulus”? Sure, pump even more currency into a rapidly hyperinflating everyday economy—right . . . (BTW, I actually don’t think that politicians are so stupid as to actually start printing money to “fight rising prices”—but hey, when it comes to stupidity, you never know how far they can go.)

In fact, the only way the Federal government might be able to ameliorate the situation is if it decided to seize control of major supermarkets and gas stations, and hand out [coupon] cards of some sort, for basic staples—in other words, food rationing. This might prevent riots and protect the poor, the infirm and the old—it certainly won’t change the underlying problem, which will be hyperinflation.

“This is all bloody ridiculous,” I can practically hear the hyperinflation skeptics fume. “We’re just going through what the Japanese experienced: Just like the U.S., they went into massive government stimulus—hell, they invented quantitative easing—and look what’s happened to them: Stagnation, yes—hyperinflation, no.” That’s right: The parallels with Japan are remarkably similar—except for one key difference. Japanese sovereign debt is infinitely more stable than America’s, because in Japan, the people are savers—they own the Japanese debt. In America, the people are broke, and the Nervous Nelly banks own the debt. That’s why Japanese sovereign debt is solid, whereas American Treasuries are soap-bubble-fragile.

How to Prepare For This Hyperinflationary Event
Neanderthal survivalists spend all their time thinking about post-Apocalypse America. The real trick, however, is to prepare for after the end of the Apocalypse.

The first thing to realize, of course, is that [while] hyperinflation might well happen, it will end. It won’t be a never-ending situation. After a spell of hyperinflation, America will end up pretty much like it is today—only with a bad hangover. [In fact,] a hyperinflationist spell might be a good thing. It would finally clean out all the bad debts in the economy, the crap that the Fed and the Federal government refused to clean out when they had the chance in 2007–’09… [Indeed,] a hyperinflationist catastrophe might in the long run be better for the health of the U.S. economy and the morale of the American people, as opposed to a long drawn-out stagnation.

Like Rothschild said, “Buy when there’s blood on the streets.” The things to do to prepare for hyperinflation would be to:
1. Invest in a diversified hard-metal basket before the event—no equities, no ETF’s, no derivatives.
2. If and when hyperinflation happens, and things get bad (and I mean really bad), take that hard-metal basket and, right in the teeth of the crisis
a) buy residential property
b) buy equities in long-lasting industries [such as] mining, pharma and chemicals… and avoid companies that offer no value-added like tech, aerospace or industrials.
The reason is, at the peak of hyperinflation, the most valuable assets will be dirt-cheap—especially equities—especially real estate.

Expect a New Normal
I have no idea what will happen after we reach the point where $100 is no longer enough to buy a cup of coffee—but I do know that, after such a hyperinflationist period, there’ll be a “new dollar” or some such, with a few zeroes knocked off the old dollar, and things will slowly get back to a new normal. I have no idea the shape of that new normal [but] I wouldn’t be surprised if that new normal has a quasi or de facto dictatorship, and certainly some form of wage-and-price controls.

Conclusion
The current situation cannot long continue. The Global Depression we are in is being exacerbated by the very measures being used to fix it—stimulus is putting pressure on Treasuries, which are being shored up by the Fed. This obviously cannot have a happy ending. Therefore, the smart money prepares for what it believes is going to happen next.

I think there’ll be hyperinflation in America—that bubble’s soon to pop. I’m guessing if it doesn’t happen this fall, it’ll happen next fall, without question before the end of 2011.

*http://gonzalolira.blogspot.com/2010/08/how-hyperinflation-will-happen.html To read his follow-up article (unedited) on the subject see: http://gonzalolira.blogspot.com/2010/08/hyperinflation-part-ii-what-it-will.html#more

- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, provides below further reformatted and edited [..] excerpts from Bryan Rich’s (http://www.moneyandmarkets.com) original article* for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) Rich goes on to say:

With the above backdrop in mind and with asset prices and bond yields falling, [here are two ways to prepare for such 'tail-events']?

1. Cash
We’re experiencing a balance sheet crisis and it has left consumers, companies and governments trying to climb their way out of a hole of debt. That’s why it’s becoming abundantly clear that deflation is a big threat, despite all of the money printing. You can flood the world with paper currencies, but you can’t make those who have been buried by debt spend or borrow again.

There’s obvious and significant deflation in some key areas of the economy – housing, for example – and other broader price measures are poised to follow and in a deflationary environment cash is king because as prices fall, while your money buys more that money tends to be harder to earn. Raising cash can help you avoid being exposed to the tail-events likely in store for financial markets.

As for returns, it’s important to pay attention to real returns. Real returns are returns after the effect of inflation, or in this case, perhaps deflation. It’s the true measure of whether or not your purchasing power (or wealth) has increased. For example, if consumer prices decline by 3 percent, the purchasing power of your cash would increase by 3 percent … the equivalent of earning a 3 percent return.

2. Opportunistic Trading
While tail-events, as mentioned above, represent a lot of risk, they only do so if you are on the wrong side. Positioned correctly, they represent opportunity. With the increasing probability of a double-dip recession and more emergency policy responses likely to come, the risks of traditional buy and hold strategies clearly outsize the potential rewards. Instead, the better reward-to-risk profile is more likely found on the short side, i.e. positioning for a fall in stocks, commodities and many foreign currencies, especially those relative to the safe-haven favored U.S. dollar, as markets adjust to a protracted period of depressed demand. Investors could profit handsomely from struggling foreign currencies and an even better payoff could come if tail-events, like sovereign debt defaults and currency devaluations, materialize.

The deflation threat has clearly caught many people by surprise and, with the reality that yields will remain at record lows for the foreseeable future, achieving investment returns by traditional strategies and asset classes has proven to be difficult [but, hopefully, the above suggestions will help you] to generate return in this environment. [In conclusion, however, please] remember that a return OF capital can be every bit as important a concern as return ON capital in this crisis period.

*http://www.moneyandmarkets.com/two-ways-to-prepare-for-%e2%80%9ctail-events%e2%80%9d-40003 (Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil.)

- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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So says Ronald-Peter Stöferle in a 71 page report* which Lorimer Wilson, editor of www.munKNEE.com, presents below, in part with reformatted and edited [..] excerpts for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) Stöferle goes on to say:

1) Dow/Gold Ratio Suggests Possible Future $10,400 Gold!
At 8.5x, the ratio is currently slightly above the long-term median of 8x. This means that gold is still relatively inexpensive in comparison with the Dow Jones. Bull markets tend to end in euphoria and excess, however, which is why we expect substantially lower values. In 1932 the ratio was 2x, and at the end of the last bull market the ratio was 1x. We think that values of 1-2x might be reached again as a result of the secular bull market. Under the assumption of a constant Dow Jones index, gold would therefore have to rise to USD 10,400/ounce.

2) Gold/S&P 500 Ratio Suggests Possible Future $6,000 Gold
Currently the ratio is almost exactly on its long-term median of 1x. Looking at the development in the 1970s, we expect a dynamic increase. Bull markets do not end around the long-term median – they end in extremis. In order to reach 6x, gold would have to increase to more than USD 6,000/ounce given a constant S&P index.

3) Gold/Silver Ratio Suggests Future Price for Silver Somewhere Between $75 and $650
Currently the ratio is about 65x and thus above the median of 55x. This means that silver is attractively valued relative to gold. A low was hit in 1920, when 15 ounces of silver would buy 1 ounce of gold. 1940 saw a row of historical highs, when one ounce of gold bought 100 ounces of silver. We experienced similar values in 1990.

Looking back over the centuries, we find that gold has been substantially more expensive since the beginning of the 20th century than in the previous three centuries. The long-term median (since 1687) is 15.7x. This also reflected the actual ratio of physical supplies: gold is about 17 times more scarce than silver. According to USGS, the measured and assumed silver resources are about 6 times as high as the ones of gold. Therefore silver is at the moment clearly undervalued at a ratio of 65x relative to gold.

[Using a gold:silver ratio of 16:1 equates to a price of $75 per ounce for silver based on the current ballpark price of $1200 per ounce for gold and suggests a price of $650 if gold were to reach a parabolic top of $10,400!]

Silver is, like gold, a monetary metal, but the relevance for the industrial sector is much higher than that of gold. This is why silver tends to outperform gold in economic upswings, whereas gold usually outperforms silver in periods of stress. The long-term average correlation since 1970 has been 0.68x.

4) World Gold Mining Index/Gold Ratio Suggests Much Higher Prices for Gold and Silver Mining Shares
Currently the ratio of the World Gold Mining index and gold is 1.7x and thus above the longterm median of 1.4x. A rise indicates that gold shares are outperforming gold. Since the beginning of the bull market shares gold mining shares have performed more or less in line with the gold price.

5) Gold/Oil Ratio Suggests Possible Future Prices for Gold and Oil in Excess of $3,150 and $250 Respectively
Oil and gold have a strong positive correlation with each other. Both commodities are traded in US dollars and tend to increase when the dollar depreciates against the most important currencies. Also, oil is one of the most important indicators for inflation and thus also for the gold market. On top of that, the argument that oil production is about to see its peak (“peak oil”) can also be applied to gold along similar lines. The constant purchasing power of gold can also be measured in terms of this ratio. For example, one ounce of oil today buys the same amount of oil as in 1945, 1982, and 2000.

The current ratio of 15-16x is slightly above the long-term median. The all-time high was set in 1973, when one ounce of gold would have bought 42 barrels of oil. On the other hand, in 2008 the ratio hit its historical low at less than 6 barrels per ounce.

[Looking at the extremes if gold were to reach the $10,400 mentioned above a 42:1 gold:oil ratio would put oil at $250; the long term median ratio of 15-16:1 would put oil at an unbelievable $650-$700 per barrel; the extreme ratio of 6:1 would put oil at an astronomical $1,733.33 per barrel. Conversely, applying the 42:1 ratio to the current price range of oil between $75 and $80 would put gold at between $3,150 and $3,360 while, for what it is worth, a 6:1 ratio would put gold at between $450 and $480.]

6) House Price/Gold Ratio Suggests Future Price of Gold at No More Than $3,000
At the moment it takes close to 250 ounces of gold to buy an average home in the USA. This means that in comparison with 2001, where the ratio was at 800 ounces per home, gold is relatively expensive and property is relatively cheap; the long-term median is 403x. However, we are still far away from the 1980 all-time low of 100x.

[Based on the current average price for a U.S. home of $300,000 a 100:1 ratio would suggest a price of $3,000 for gold; a long-term median ratio of 403:1 would suggest $750 gold and the extreme ratio of 800:1 would suggest an unrealistically low of only $375 for an ounce of gold. Furthermore, with continuing declines in the average price of a house to be expected in the U.S. this can only decrease the projected price for gold in the future using the house price:gold price relationship.]

Conclusion
The long-term comparison of gold and other asset classes paints a clearly positive picture. While many ratios are close to the median, this goes to show that the current valuation is certainly not excessive. It is therefore also very easy to rebut the heavily cited argument of the “gold bubble”.

Bull markets end in euphoria, and this substantiates our argument in favour of an imminent transition to an accelerated trend phase [- to somewhere between $3,000 and $10,400 per ounce for gold, between $75 and $650 per ounce for silver and in excess of $250 per barrel for crude oil.]

*http://www.gata.org/files/ErsteGroupGoldReport-06-2010.pdf

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given.
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See larger image Technical Analysis for the Trading Professional (Hardcover) By (author) Constance Brown List Price: $55.00 USD New From: $29.99 In Stock Used from: $22.49 In Stock

In fact, there are over 80 such indicators divided into 6 categories (trend, momentum, volatility, market strength, support/resistance and cycle). That being said some are very technical, some are infrequently used and some are more effective than others. The most popular indicators, and also available for use free at online charting service such as stockcharts.com and/or bigcharts.com, are the trend, momentum, market strength and volatility categories. This article deals with the Market Strength and Volatility Indicators as follows:

A. Market Strength Indicators

1. On Balance Volume (OBV)
- focuses on the importance of volume and how it can affect a given price and the security’s momentum, the premise being that volume precedes price movements.

It works this way:
a) If volume is decreasing when the price of a security is rising then it is a sign of increased selling pressure, which if continued, will send the price of the security lower.
b) The opposite is true with increasing volume on up days, which is a sign of buying pressure.
c) If the OBV is moving in the same direction as the existing trend, it is a signal that the strength of the trend remains.
d) A 20-day moving average of the OBV is often added and when the OBV crosses the 20ma the divergence signal of a trend reversal is confirmed.

2. Accumulation/Distribution
- attempts to gauge supply and demand by determining whether investors are generally “accumulating” (buying) or “distributing” (selling) a certain security by identifying divergences between the security price and volume flow.
In practice, this indicator is used to find situations in which the indicator is heading in the opposite direction as the price. Once this divergence has been identified, the trader will wait to confirm the reversal and makes his/her transaction decisions using other technical indicators discussed here.

3. Chaikin A/D Oscillator
- monitors the flow of money in and out of the market by plotting the difference between the 10-day exponential moving average and the 3-period exponential moving average of the Accumulation/Distribution. This simply compares the money flow to the price action of a security which, in turn, allows the chartist to recognize tops and bottoms in short cycles.
It is suggested that the Chaikin Oscillator be implemented in conjunction with a 21-day envelope based on the price of the security. Price envelopes are plotted at a set percentage above and below a moving average to indicate overbought and oversold levels.

4. Money Flow Index (MFI)
- used to measure the strength of money going into and out of a security and, as such, can be used to predict a trend reversal.

It is similar to the RSI but accounts for volume whereas the RSI only incorporates price. The MFI is range-bound between 0 and 100 and is interpreted in a similar fashion to the RSI.

5. Price by Volume (PBV)
- the standard volume histogram re-applied to price instead of time so, instead of being able to determine when a stock is going in and out of favour (indicated by increasing volume levels over time), PBV enables you to determine the level of buying or selling interest at a given price level.

Volume strength (as shown by the horizontal length of the PBV histogram and indicating the amount of shares that traded at the given price level) and volume type (as shown by the two different colours seen on each bar and referring to the number of shares sold compared to the number of shares bought) allow you to determine the strength of a particular price level. Once you have this information you can combine it with trend lines and other indicators to determine support and resistance levels.

B. Volatility Indicators

Bollinger Bands
- a band plotted two standard deviations away from a 21-day simple moving average.

Because standard deviation is a measure of volatility, Bollinger bands adjust themselves to the market conditions. When the market becomes more volatile the bands widen (move further away from the average), and during less volatile periods the bands contract (move closer to the average). The tightening of the bands is often used by technical traders as an early indication that the volatility is about to increase sharply. The closer the prices move to the upper band, the more overbought the market, and the closer the prices move to the lower band, the more oversold the market.

Conclusion
There you have it – an extensive and in-depth assessment of how to evaluate buy/sell decisions for any security using the 5 market strength indicators and the most frequently used volatility indicator.

If ever there was a “cut and save” investment advisory this article is it!

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See larger image Technical Analysis from A to Z, 2nd Edition (Hardcover) By (author) Steven Achelis List Price: $39.95 USD New From: $23.61 In Stock Used from: $17.00 In Stock

So reports Sarah Jones (www.bloomberg.net). Below Lorimer Wilson, editor of www.munKNEE.com, presents further reformatted and edited [..] excerpts from her article for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) Jones’ report continues as follows:

“The coming months hold the potential to be the most exciting of the year so far,” a team including Steve Hochberg and Peter Kendall wrote in their latest Global Market Perspective report. “Once the neckline is breached, the measured move for the selloff targets the area surrounding 8,000” [for the DJIA].

Prechter is famed for predicting the stock market crash of 1987 via a system of measuring investor psychology known as the Elliott Wave Principle, though his forecasts have had mixed results. His standing suffered in the 1990s when he missed the almost decade-long bull market. In December 2002, he said the Dow would fall below 1,000. It hasn’t dipped below 6,000 since then.

The Elliott Wave Theory was originally developed by accountant Ralph Nelson Elliott during the Great Depression. Elliott concluded that market swings, or waves, follow a predictable, five-stage structure of three steps forward, two steps back.

Technical analysts observe price charts to forecast resistance levels, or ceilings restricting further price increases, and support levels, or floors limiting declines. The trading patterns and prices are used to predict changes in a security, commodity, currency or index.

A head-and-shoulders pattern occurs when an index forms three consecutive peaks, with the middle being the highest. The start of a decline is signaled when prices fall below a support level in line with the low points between the peaks. The Dow average traced the left shoulder of the pattern in January, followed by the head in April, according to the report.

The right shoulder of the pattern is now ending and the downward-sloping neckline “displays market weakness,” the report said. The Dow… has fallen 7.5 percent from this year’s highest closing level on April 26 amid concern that European nations will struggle to reduce their budget deficits and speculation that the U.S. economic recovery may be flagging.

“The message from Elliott waves as well as this particular technical pattern, on both a long- and intermediate-term basis, is that the Dow’s next significant move should be a decline of several thousand points,” the report said. “The next phase of selling should be broad-based, with all sectors participating.”

*http://www.businessweek.com/news/2010-08-18/dow-average-to-tumble-to-8-000-elliott-wave-says.html (Jones can be contacted at sjones35@bloomberg.net)

Editor’s Note:
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Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, presents below reformatted and edited [..] excerpts from an article* by Martin Weiss (www.uncommonwisdomdaily.com) for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) The article goes on to say:

1. The Obama administration and Congress will be paralyzed and unable to pass another big stimulus package and unable to prevent a double-dip recession!
Just in the past few weeks, we’ve seen an outpouring of bad data and news on the economy — GDP slowing sharply, a key manufacturing index hitting a seven month low, home sales running at the lowest level in nearly a half-century, bank lending falling – and horrendous jobs reports.

Voices are clamoring for another stimulus package but… Congress is paralyzed… and the President does not have the political – or financial – capital to make it happen. The Congressional Budget Office has estimated that the U.S. budget will produce a deficit of $1.5 trillion this year and $1.3 trillion in 2011, already far worse than they thought just a year ago… and now they’re going to get far lower income tax revenues… and far bigger bills for unemployment checks than they’ve been expecting. Even if the economy just slows down moderately, the deficit could explode well past $2 trillion in 2011 and it’s the exploding deficit that’s bringing massive political resistance to more stimulus on both sides of the aisle.

2. The entire burden of fighting recession and financing deficits will fall on central banks and, as such, Bernanke and his counterparts in Europe will launch a second, even bigger round of money printing!
These [new] paper dollars will not create real prosperity in the United States or Europe… and, [unfortunately,] a substantial portion of that money [will] wind up flowing to other countries where there is true, fundamental growth.

3. The sovereign debt crisis will soon return with a vengeance — first in Eastern Europe, then in the U.S. and the U.K.!
The sovereign debt crisis is not over by a long shot… even though the IMF and the EU [primarily Germany] bailed out Greece, Portugal, Spain and all the other PIIGS countries. Everyone seems to forget that the PIIGS countries are not the only ones in trouble. According to one of the world’s most respected institutions, the Bank of International Settlements (BIS), the sovereign debts of the United States (90% of GDP) are worse than the sovereign debts of PIIGS countries like Ireland (83%) and Spain (73%). Furthermore, the BIS says that, if the U.S. government allows current trends to continue, then …

4. The government debt burden in the United States will soon be worse than the debt burden in Greece!
Ultimately, the debt burden in the U.S. will reach 400% of GDP, more than triple the debt burden of Greece today… [This will result in] more recession in Europe and the U.S., more money printing to offset the shocks, more declines in the euro and the U.S. dollar … and at best, more false prosperity.

5. Growth in China will continue to be at least four times greater than that of the U.S. and Western Europe!
As mentioned above, a substantial portion of that money [will] wind up flowing to other countries where there is true, fundamental growth – and where the growth is based on real demand – and that’s China and the rest of Asia. Let’s compare the performance of the U.S. versus China:
a) the U.S. economy contracted by 2.4% last year despite all the bailouts while China’s economy GREW by 9.1%
b) the U.S. is growing at an annual rate of about 2.5% while China is expected to grow 10.5%
c) retail sales in China soared 18%, six times better than in the U.S.
d) China’s exports in June surged 44% compared to last year while U.S. exports increased by a measly 2%
e) China now consumes more energy than the U.S. and General Motors now sells more cars in China than it sells in the U.S.

[Furthermore,] were you to add up all of America’s gold in Fort Knox and other vaults, plus all the foreign currency reserves and drawing rights at the U.S. Treasury, you would get a grand total of $490 billion… but against that we have debts to foreigners of $2.1 trillion and if you subtract America’s foreign debts from America’s cash, you’ll see that the U.S. is under water to the tune of $1.6 trillion. Meanwhile, China has total gold and reserves of $5 trillion, minus only $374 billion in foreign liabilities. So it’s in the black to the tune of $4.6 trillion! The bottom line: China sits on the biggest mountain of cash in the entire world, while the United States is down in the deepest valley of debt in the entire world!

China is not alone, however. Consider Singapore, for example, whose GDP has expanded year-to-date at an annual rate of 19.3% and that’s eight times faster than the GDP growth in the United States. Then there’s Indonesia…

6. Over the next 12 months, investors in Indonesia will make even more money than investors in China!
Indonesia has growing like a weed and now it’s growing even faster. Its stock market is up 20% so far this year. Its currency has surged 5% – and it’s just warming up. There is a massive shift in capital and wealth from the West to the East… and Indonesia is getting a supersized share of that wealth. Foreign investment in Indonesia has surged 51% compared to last year. This is a megatrend of far-reaching consequences.

7. While Asia outperforms the U.S. and Europe, Brazil and Chile will outperform most of Asia!
The big growth spurt in China and Asia was the first wave. Now, the big growth spurt in countries like Brazil and Chile is the second wave. If you’re looking for the next China, the next massive growth spurt that will carry forward for many years, you should go to South America. South America exports to China and Asia, and that was the starter engine for growth in South America but now South America’s growth engines are powered by domestic demand.
a) Brazil
Just a few years ago, over half of Brazil’s people were at the margins of society, outside the cash economy. Now, those same people open bank accounts. They use credit cards. They pay taxes. Just a few years ago, Brazil was importing energy. Now it’s entirely self-sufficient in energy and awash in new oil discoveries.
b) Chile
Chile has come so far so fast it’s now classified as a developed economy. Chile produces more copper than any other nation in the world — five times more than the United States. While U.S. consumers are strapped for cash and cutting back, Chile’s are cash rich and spending more. While U.S. banks are struggling, Chile’s banks just enjoyed a 57% jump in profits in the first half… Plus here’s the biggie: unlike the U.S., Brazil and Chile have virtually no foreign debts.

The big picture is very clear — bad news in the U.S. and Europe, good news in Asia and South America. Now let’s get down to the heart of the matter — how investors can make money.

8. Some of the greatest fortunes in the world will be made in international ETFs
Right now, there are 86 single-country ETFs — one or more for each of the major countries in the global markets today. You can pick almost any country with a viable stock market… click your mouse or call your broker to buy an ETF for that country… and you’ll instantly have a nice, liquid, diversified basket of that country’s leading companies. [In addition,]there are 103 other indexes in other countries that have all outperformed the best performing index in the U.S. For example, since the March lows of last year, the Chile ETF is up 104%, Australia’s +105%, one of the leading China ETFs is up 111%, Brazil is up 114%, Singapore +127%, South Korea +130%, Thailand +143%, and India +158%.

On a 2009 calendar year basis, if you had bought the ETF that tracks the Dow Jones Industrials at the beginning of the year and sold it at the close of last year, you’d have a gain of 22.8%, including dividends. On a comparative basis, however, the Singapore and Australia ETF were both up 68%, South Korea was +71%, Thailand was +81%, Chile was +86%, India +102% and Brazil +121%.

Year-to-date the Dow Index is up a meager 2.2% while the Dow ETF which includes dividends is up about 3.7%. A couple of foreign markets, like Brazil and Australia, are down a tad but many foreign markets are, again, greatly outperforming the Dow ETF. South Korea and India are up 2 times more than the Dow and Chile, which we talked about earlier, is beating the Dow by 5.5 to one this year.

The above results are kind of short-term oriented, just 2009 and 2010… but if you want to invest with core, long-term money, go all the way back to the beginning of 2003 and consider how much you could have made. In Singapore, you could have made 274%, South Korea +194%, Mexico +363% and, again, in Brazil +972%! That was eighteen times better than the Dow.

If you’re not confident in just a single country, there are 90 international ETFs that focus on broader regions — the Pacific Basin, East Asia minus Japan, Southeast Asia, Latin America, and many more. All told, including all the different ones mentioned previously, there are at least 225 international ETFs available to U.S. investors — all regulated by the U.S. authorities, all listed on major U.S. exchanges.

The aforementioned is all for up markets. In down markets… buy inverse ETFs. With inverse ETFs, the more the market falls, the more money you can make. It is easy to buy inverse ETFs and they number exactly 100! One hundred ETFs that are designed and built, from the ground up, for declining markets. You never have to go short. You never buy options. You never open a margin account or borrow money. You just buy low and you sell high — exactly like you would with any stock, in a regular stock brokerage account, online or offline. That’s it.

[An excellent] long-term strategy… is to use strength in the West to reduce your exposure and use weakness in the East to increase your stake, i.e. wait for rallies in the U.S. markets to sell and wait for declines or corrections in Asia (and South America) to buy…[and when that occurs] buy Market Vectors Indonesia (symbol IDX)… and iShares MSCI Chile (symbol ECH).

Knowledge alone is not enough, however, because the only people who make money are the ones who also have the courage to transform their knowledge into action. Same for investors. Until you act on what you know, those kinds of profits will continue to be out of your reach.

*http://www.uncommonwisdomdaily.com/8-bold-new-forecasts-for-2010-9964?FIELD9=3 (Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. To view archives or subscribe, visit their web site.)

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is permitted provided full credit is given.
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a) Dividend Yield
First let’s look at those stocks with high dividend yields. There are currently only 17 stocks with dividend yields of 5.7% or more which represents only 3.4% of the total number of stocks in the S&P 500. Of those only 11 have dividend yields of 6% or more. Below is the list of such stocks:
1. Frontier Communications Corp (FTR) 9.7%
2. Windstream Corporation (WIN) 8.9%
3. CenturyTel, Inc. (CTL) 8.1%
4. Pitney Bowes Inc. (PBI) 7.4%
5. Verizon Communications Inc. (VZ) 6.5%
6. Reynolds American, Inc. (RAI) 6.4%
7. AT&T Inc. (T) 6.4%
8. Altria Group, Inc. (MO) 6.2%
9. First Energy (FE) 6.1%
10. Health Care REIT, Inc. (HCN) 6.1%
11. Pepco Holdings, Inc. (POM) 6.1%
12. Progress Energy, Inc. (PGN) 5.9%
13. Cincinnati Financial Corporation (CINF) 5.9%
14. Ameren Corporation (AEE) 5.7%
15. Qwest Communications International Inc. (Q) 5.7%
16. Duke Energy Corporation (DUK) 5.7%
17. Lilly, Eli (LLY) 5.7%

b) Payout Ratio
Please keep in mind, however, that dividends are paid from earnings and, as such, should be a modest percentage of earnings. This relationship is known as the payout ratio and is calculated by dividing the dividend by the company’s net income. The payout should be less than 60% for nearly all stocks except qualifing utilities, publically traded partnerships, and real estate investment trusts. On that basis only 2 of the above stocks qualify with dividend payout ratios as follows:
1. Lilly, Eli (LLY) 50.7%
2. First Energy (FE) 56.4%

c) Dividend Growth
The next questions you should ask yourself are related to dividend growth and specifically:
a) has the company has failed to raise its dividend for one year and
b) has the company cuts its dividend in the past year or, to put it in other terms
c) has the company’s dividend grown year after year for the past 5 years.

For the conservative dividend investor failure of a company to raise its dividend is a red flag unless such a failure is related to spending in order to have greater revenues in the future while dividend cuts are seen as the kiss of death for the price of the company’s stock. Below are the above 2 companies according to their 5 Year Dividend Growth Rate:
1. FirstEnergy (FE) 8.0%
2. Lilly, Eli (LLY) 6.2%

d) Price to Earnings Ratio
Last but not least is each stock’s price to earnings (P/E) ratio. A ratio above 15:1 suggests that the stock is overpriced unless it is a major growth stock while a ratio below 5:1 would suggest the the stock is underpriced for some apparent reason. At both extremes further review should be undertaken to understand the situation better to help you make truly informed decisions as to whether they should be purchased or not. The P/E ratios for the above 2 companies are as follows:
1. FirstEnergy (FE) 11.1%
2. Lilly, Eli (LLY) 8.5%

Conclusion
There you have it! Out of 17 stocks with substantial dividend yields only 2 stocks – FirstEnergy and Eli Lilly – have payout ratios that suggest that the dividends are not in jeopardy, have dividends that continue to grow consistently over time and prices relative to their earnings that suggest that the stocks are not over-priced at their current levels.

Disclosure:
The above analyses do not preclude that there are certain aspects of their financial situation, management or business plans that might hamper their earnings growth over the years to come. As such, and you have heard it all too often before, you must do your own extensive due diligence before making any buying decision and I urge you to do just that. Please look at the analyses in this article as giving you a head start in your own due diligence and not as a recommendation to buy. For the record I do not own either of said stocks as I have my monies deployed elsewhere to achieve different objectives than generating high yields.

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See larger image Dividend Stocks For Dummies (Paperback) By (author) Lawrence Carrel List Price: $24.99 USD New From: $14.28 In Stock Used from: $14.95 In Stock

So says Larry Edelson (www.uncommonwisdomdaily.com) in an article* entitled “Read This Now.” Below Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, presents further reformatted and edited [..] excerpts from the article for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) Edelson goes on to say:

I point this out not to brag, but merely to emphasize how important it is that you read on to learn what my models are saying now, and how seriously their messages should be taken. Here are the forecasts and what you should be watching:

1. The Dow will:
a) plunge to between 8,700 and 9,000 by early November and then
b) soar to between 27,000 and 44,000 by 2015!

Call me crazy, call me nuts but I’ve written about it before, and that kind of stock market inflation has happened in nearly every third-world and emerging economy on the planet. The only difference is that this time, it will happen in the FIRST world, and chiefly in the U.S. no matter what the economy does.

2. The U.S. Federal Reserve will:
a) print more money to inflate away the problems no matter how much it takes – whether it’s another one trillion, five trillion, twenty trillion, or even thirty trillion dollars – to try and turn things around
b) support the U.S. bond markets — and keeping interest rates at near zero — by forcing banks to buy U.S. bonds (like the Fed did during WWII)
c) slash reserve requirements and restricting foreign capital outflows with the end goal of massively DEBASING the U.S. dollar.

The Fed thinks that will eventually inflate financial assets higher recreating trillions of dollars of [new] wealth from which will flow new businesses, a wave of new innovation, millions of jobs being brought back, millions more new jobs being created, real estate prices appreciating once again, and more. In short, everything will be hunky-dory once again. If you fight the Fed on this, you’re going to lose your shirt so once you see the Dow below 9,000, start getting ready to go LONG the market, because the Fed is determined — and does have the ability — to inflate the financial markets higher, much higher.

3. Gold will:
a) fall to between $1,000 and $1,100 an ounce by the end of August and then explode to new record highs – most likely by the end of the year and then to at least $2,300 an ounce through 2011 and 2012 and then
b) march to near $5,000 per ounce by 2015.

The driving force will NOT be inflation but, rather, the final recognition that the U.S. is broke beyond repair … that the Fed will print however many trillions of dollars it wants to paper over the mess and retain control for as long as possible …

[Given the above and that] the U.S. dollar is doomed as a reserve currency I suggest that you start preparing [for all such eventualities by deploying] the following steps – which I cannot over-emphasize enough:
1: Minimize your exposure to the stock market, right now. Get out of all stocks with the exception of core gold shares and other select natural resource, tangible asset stocks.
2: For any liquid cash you have, not earmarked for gold, keep it in safe, liquid, short-term investments such as money markets or put two-thirds of such cash into the iShares Barclays TIPS Bond Fund ETF (TIPS) and one-third into the Direxion Daily 10-Year Treasury Bear 3X Shares (TYO) inverse bond fund.
3: Use the upcoming weakness in the gold market to buy or add to positions via the SPDR Gold Trust ETF (GLD) (each share represents 1/10 of an ounce of gold. When you buy this fund, it’s like buying a mutual fund, but one that holds only physical gold. Plus, you eliminate storage and shipping worries because the gold is held in trust for you) or, if you’d rather buy a gold stock mutual fund, consider the Tocqueville Gold Fund (TGLDX) or the Market Vectors Gold Miners ETF (AMEX: GDX) which holds 10 of the largest gold miners in the world.

Conclusion
Stay open minded and think dynamically going forward which means not accepting the status quo, not accepting mass hysteria, not following old models and old economic rules, and using “uncommon wisdom”. Period. That will be the only true way to both psychologically and financially survive not just the next few months, but also the next few years.

*http://www.uncommonwisdomdaily.com/read-this-now-9922?FIELD9=2 (P.S. For ALL of my specific recommendations and precise buy and sell signals, become a member of Real Wealth Report, for a modest $99 a year. You’ll get 12 monthly hard-hitting issues packed with uncommon analysis and insights into today’s world and the great financial crisis … plus flash alerts, advance notice of special situations, and more. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. To view archives or subscribe, visit their web site.)

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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So say Steven Russolillo and Tomi Kilgore in an http://online.wsj.com article* entitled “‘Hindenburg Omen’ Flashes.” Below Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, presents further reformatted and edited [..] excerpts from the article for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) They go on to say:

The Origin of the Hindenberg Omen
Jim Miekka, a blind mathematician, came up with the “Omen” in 1995 as a way to predict big market downturns, developing a formula that parses data like 52-week stock levels and the moving averages of the New York Stock Exchange. The name “Hindenburg Omen” (named after the famous German airship that crashed in Lakehurst, N.J. in 1937) was coined by a fellow market technician, Kennedy Gammage, when he and Miekka found out the name “Titanic” already had been taken. Miekka currently writes a Wall Street newsletter called the “Sudbury Bull & Bear Report”.

The Implications of the Hindenberg Omen Occurring
The Hindenburg Omen occurs when a number of technical indicators align on the NYSE and has been behind every market crash since 1987. Looking back at historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77% [conversely, 23% of the time no significant market downturn occurred] and usually took place within the next forty-days. The probability of a panic sellout was 41% and the probability of a major stock market crash was 24%. The Omen was activated on the New York Stock Exchange on August 11 so the probability is that we will see a steep market decline sometime in September.

The indicator last occurred in October 2008, according to UBS AG, and was triggered a total of seven times in 2008 as the S&P 500 recorded its steepest annual drop since the Great Depression. The Hindenburg Omen was also reportedly triggered on June 13, June 21, and June 22, of 2007 near the top of U.S. equity markets.

The Criteria That Must be Met to Activate the Hindenberg Omen
1. All criteria must be met for a confirmed occurrence within the next 36 days. (One signal is usually an indication of a market top, but the Omen becomes more accurate when there are two or more close together.)
2. The daily number of new NYSE 52-week highs and the daily number of new 52-week lows must both be greater than 2.5% of the total issues traded that day.
3. The smaller of the 52-week highs and lows must be greater than or equal to 79 (or 2.5% of 3,168 issues).
4. The NYSE’s 10-week moving average must be rising.
5. The McClellan Oscillator, a measure of market fluctuations, must be negative.
6. New 52-week highs can’t be more than twice the new 52-week lows. (However, it is acceptable for the new 52-week lows to be more than double the 52-week highs.)

The indicator denotes unhealthy internals in the marketplace, with a large number of stocks making both new highs and new lows. It suggests a lack of internal uniformity in the stock market and, therefore, a much higher than normal probability for a steep decline.

What Analysts Are Saying About the Hindenberg Omen
According to UBS technical analyst Michael Riesner, “It’s an interesting name but what you really have as a technical background is a classic distribution phase in the market,” Riesner said. “It’s the classic tug of war between bulls and bears that you have there.”

“The Hindenburg Omen does show some deteriorating internals, which signals some major concerns,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research, “but it isn’t a reason to move to 100% in cash. We’re taking a wait-and-see approach, but considering its recent history, we’re considering it more than other indicators.”

David Buik at BGC Partners describes the Omen as “easily the most feared technical pattern in all of chartism”. Ominously choosing Friday the 13th as the date on which he drew attention to the matter, Bulk warned that the technical outlook suggests a stock market collapse is imminent.

When asked by CNBC what his advice would be for traders, UBS’ Art Cashin said that investors should be “very cautious” because “there’s been a lot of buzz in the street about the Hindenburg Omen… It bears watching. It’s a warning… it isn’t confirmed, but we will know in the next 3 or 4 weeks.”

A confirmed Hindenburg Omen has occurred prior to every major stock market crash since 1987. In other words, if yesterday’s alignment is confirmed by another Hindenburg Omen in the next 36 days, it may be time to head for the hills – if you already haven’t.

*http://online.wsj.com/article/SB10001424052748703321004575427791421316112.html?mod=rss_markets_main

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The authors’ views and conclusions are unaltered.
- Permission to reprint in whole or in part is permitted provided full credit is given.
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by Johnny Punish

I’ve read many articles about living and retiring in Mexico. A good number of them tell of the good and focus on a specific market. These are mostly written by local business people aiming to attract you to a certain project to purchase.

As an artist who is neither a real estate salesperson or travel agent pushing an agenda, I felt it’s time to have a real discussion and look at the very best places to retire with real Pro’s and Con’s so the reader can really make an informed decions on where to go that serves their needs, interests and ambitions.

First to put this comprehensive report together, I have consulted with highly experienced Ex-pats who have lived and/or live in the places that I rate here. For me, through my travels, I have met these amazing people who really know and walk the talk and it’s been an eye opening experience.

So, without further wait, here’s The Johnny Punish Top 10 Places to Live and Retire in Mexico and the reasons why…

1. Lake Chapala, Jalisco
2. Ensenada, Baja California
3. San Miguel de Allende, Guanajato
4. Guadalajara, Jalisco
5. Merida, Yucatan
6. Riviera Maya, Quintana Roo
7. Mazatlan, Sinaloa
8. Puerto Vallarta, Nayarit
9. La Paz, Baja California
10. San Cristobal de las Casas Chiapas

1. Lake Chapala, Jalisco (Winner)

According to Kristina Morgan of Focus on Mexico, she says “Of all the places in Mexico I have been, none can quite compare with Lake Chapala. There’s something about this place that just seems…magical. And as corny as it sounds, that’s the word I hear people use to describe Lake Chapala time and again. Lake Chapala gets into your heart and becomes home. It’s like stepping back 50-70 years here regarding the simpler lifestyle, culture and values. When I’m here I feel like I can be me, like I can breathe a little more freely and be the person I want to be and this is a sentiment expressed by most everyone who has ever been here or lives here”.

Kristina has lived in the Chapala area for 5 years before returning to Colorado, where she lived for another four years. She says “There wasn’t anything really wrong with our lives in Colorado but we also knew there was much more to life than we were able to experience in our daily suburban grind. I wanted to live my life on purpose, not by default. So we made a list of pros and cons and quantified each and returning to Lake Chapala won by a landslide. In our case, this was a giant leap of faith. We were not retired, had limited savings and three small children to think about”.

Many people said Kristina and her family were crazy. But yet, those same people now say they wish they could do what they did. Kristina tells them that they can and that it just takes a detailed dream with action behind it.

Lake Chapala used to be just a retirement community but in the last 10 years that’s changed and a lot of younger families and entrepreneurs are moving there for the obvious business opportunities and lower cost of living.

The Lake Chapala community is comprised of a string of villages, mostly on the north shore, with Ajijic being the crown jewel of the area in terms of artisans, charm and amenities. Horses clopping down the road, vendors selling fresh fruit, women weaving, live music everywhere from classical to salsa and teenagers helping their grandmothers are common sights. There’s a happy hum of activity there.

For us, the most compelling reasons (besides raising our children here) are listed below.

Pros

The Climate
The weather, of course, is a huge draw. National Geographic touts Lake Chapala as the 2nd best climate in the world. The Lake is surrounded by the Sierra Madre Mountains and is a mile high, like Denver, Colorado so we have very little humidity. The distance inland is still close to the ocean but far enough away to not have to worry about storms and hurricanes off the coast. We have all the same flora as Hawaii as well as the same vegetation in arid states like Colorado—pines and palms—growing equally well, side by side!

The most-developed expat/English infrastructure in Mexico
You may feel like you’ve stepped back in time, but there’s still a lot to do here, from golfing, to boating, to organized group activities including a community theater in English, two American Legion posts, the Lake Chapala Society, churches in English in every denomination, concerts and events (the Bolshoi Ballet even came to Ajijic!), live entertainment, world class restaurants that will impress even the most seasoned palate and much more!

So many people have a love affair with Ajijic and the Lake Chapala area that it is the largest expat community anywhere outside the U.S. and Canada. I figure 20,000 expats can’t be wrong. But as Latin World says, “Despite being home to one of the heaviest concentrations of North Americans in Mexico, Lake Chapala doesn’t feel quite as Americanized as other retirement enclaves in Mexico.” I believe that is due to the fact that this isn’t a resort area catering to tourists, but rather a place to adopt a new way of life and be a part of a community.

There are also many real opportunities to get involved and make a difference through any of the numerous charities here if you want to volunteer your time. The rewards are greater than any paycheck.

Affordable, top-notch medical care is available
Though it may sound surprising, the University of Guadalajara boasts an excellent medical school. In fact, many U.S. doctors are educated there! There are excellent facilities, doctors, specialists and medical staff in Mexico and a major benefit is that they are readily available (no long waiting periods). Many of the doctors even speak English and often have taken some training in the United States or abroad. The doctors here have such a gift for listening carefully to you and not making you feel as if they don’t have time to spend with you. They even make house calls! There are two clinics here and there are world-class hospitals in near-by Guadalajara that resemble 5 star hotels but at a fraction of the cost.

Proximity/Accessibility: Guadalajara, airport, coast
One of the reasons we chose Lake Chapala is its easy access to other places of interest in Mexico. Ideally located about 40 minutes from Guadalajara (Mexico’s 2nd largest city), 25 minutes from Guadalajara’s international airport, and as close as 3 hours to the pacific coast and an easy 11 hour drive to back to the U.S. so it is easy to trade the frigid winters and the wilting heat of summers north of the border for paradise. We wanted to know that they can get back home quickly if we need to so being so close to the airport makes being home in a few hours possible. It is interesting to note that travel is part of the culture in this area, for Mexicans and retirees alike and the low surcharge at the airport in Guadalajara makes flying more affordable.

Low cost of living
I didn’t move to Mexico to spend a lot of money! It has been said that Lake Chapala is the place to be if you want a bargain and all the amenities you’re used to from back home.

Home prices are still low here. I know people who have looked into different retirement destinations all over Mexico and say they have found the best deals here. We also have an MLS, which almost nowhere else in Mexico has so it is easier find the right home for you. On the coast, you must purchase property through a bank trust but because we are inland you are allowed to own property outright through a direct deed.

We pay our maid about $35 USD a week for 15 hours of work. I never could have had a maid for 15 hours a week while we lived in Colorado. The average cost for a single person to live very well is $1800 a month but I know many people doing it on significantly less than that. We can have a steak dinner for $12.00, with wine and there are fresh organic foods and a weekly farmers market available as well. Labor is very inexpensive here, too so if you are interested in custom work or art, etc it’s easily within reach.

All of this adds up to a lifestyle there is no way I could afford to duplicate in the U.S. and that it would be hard to give up.

This is a real community
To me, this is the most compelling reason to come here. People come to Lake Chapala for the weather and lower cost of living and end up staying because of the people. Lake Chapala still has a small-town feel to it. It seems like everyone knows everyone and the people, both Mexican and expats, are very friendly and look out for each other. This area also has the largest singles population owing to the sense of safety and community here. It is said that people are nicer here than they were back home. The Mexicans are still very warm and welcoming, largely due to the fact that most of the transplants are very cognizant that we are guests in their country and we try to be as gracious and considerate as our Mexican friends are. There is still an old-world, genteel flavor here. Mexicans embrace family, customs and tradition and tend to dote on their children and cherish their elderly. The people who come here are frequently in awe of the close ties in our community and how quickly they are welcomed and accepted. I haven’t seen anything like this anywhere else in the world, not even in other places in Mexico.

A safe and secure environment
Despite a rather negative media representation which focuses on drug related violence, Mexico is actually a top choice when it comes to safety. The conflicts which make the headlines are mostly limited to the U.S. border area; the majority of the country is virtually unaffected, and news of these unfortunate events is as distant to these areas as it is to the U.S., and in some cases, even more so.
“In Lake Chapala violent crime is almost unheard of,” points out Shawn Gaffney. “In Lake Chapala, the citizens walk the streets at any time of day or night safely and confidently.”
Statistics back this feeling of comfort; in most parts of Mexico, violent crime is significantly lower than in large U.S. cities.

Stunning beauty
Lake Chapala has breathtaking sunsets over the lake, and majestic mountain views. Flowers are prolific and seem saturated in bold color. There are charming cobbled streets with stone walls and fuchsia bougainvillea draped like petticoats over the tops. The best way to give you a picture is that people say it looks like Hawaii. The vivid color here is whimsical and artistic, with many murals all over the area, including some that are painted on houses and businesses. There are at least 3 waterfalls in the area and thermal springs that will transport you with their relaxing and curative properties. Sundrenched terra cotta tiles, mesmerizing vistas and tropical foliage make it feel like you’re on permanent vacation—but without the heat, humidity, tourists, hurricanes or expense.

Solid investment
When you’re considering a place to retire, no one wants to flush their money into an area where they would have a hard time getting it back out if they ever needed to. This area is at a steady growth rate with promise of more future growth, especially with the Pan AM games being held in Guadalajara in 2011 and some of the water sports competitions being held at Lake Chapala. You’ll get a lot of bang for your buck now while knowing your money will grow here.

Slower pace of life:
We can learn so much from the people here about what is truly important in life. For those who are seeking to simplify their lives, Lake Chapala should be on your short-list. This isn’t a “time is money” culture. Mexicans work to live while many of us have lived to work. In general, the people here have their priorities straight. It’s all about how you treat people and recognizing that each day is a gift to be lived fully and graciously.

Cons

Altitude
At a mile high, some people who have COPD or other severe respiratory illnesses may find this is a little too high in altitude for them. However, some people report feeling far better here and being able to sleep better than they ever could. The elevation is also a major reason we have such a temperate climate and why the area isn’t prone to natural disasters.

Language
If you move to Mexico you’re going to have to learn at least a little of the Spanish language to get by. Some people find this daunting and intimidating. The good news is that compared to anywhere else in Mexico, English is spoken to one degree or another by most people.

Small villages
If you’re looking for a big city feel then Lake Chapala isn’t for you. Think quaint fishing villages with an old world feel and modern amenities and you’ll have the idea. However, village life has its benefits in safety and community and if you need a break from the tranquility and want to head to the big city then Guadalajara is just up the road.

Noise levels
This can be said about any area in Mexico but I still think it needs to be said. Village life is noisy with live music, church bells tolling at all hours, roosters who crow all day and night, fireworks, parades and processions, parties and cars driving by announcing everything from their wares to who has a fresh catch of fish down at the pier. On Mother’s Day, some lucky moms are woken before dawn with mariachi bands serenading them outside their window. If this would drive you crazy, then be sure to look for homes on the outskirts of the villages or in a planned development, or gated community. Thankfully, there are a lot of places to choose from to escape the noise.

Not a Business Mecca
For those young and agressive, they will be disappointed because the Lake Chapala area is NOT a mecca for business. Business gets done but for the most part, retiree’s are slower more set in their ways and thus are not seeking big opportunities so trying to sell them something using a carrot for the future can be frustrating and will land you in the “con man” category real quick.

It is not the ocean
Lake Chapala is Mexico’s largest lake at 77 miles long and 13 miles across but if your heart is set on a daily routine of drinking a margarita on the beach with endless waves stretching out to the horizon then this isn’t for you. While this is the largest lake in Mexico and the conquistadores thought this was the ocean when they first arrived here, it is still a lake. But the lake is beautiful and ideal for sailing, swimming and recreation and the ocean is just three hours away.

In short, Lake Chapala is a one in a million place with everything it offers. Of course, one size doesn’t fit all but if you’re looking for a paradise with a low cost of living, an established English infrastructure and activities, modern amenities, near-perfect climate and a friendly and safe community, come visit Lake Chapala and see if this might be for you. To help you in making a decision, Focus On Mexico offers 8-Day Educational Programs to Ajijic and Lake Chapala, Mexico (2nd Best Climate in the World). Join them on a Focus program and learn why thousands of Americans and Canadians chose to retire in Lake Chapala.

Their programs offer the perfect balance; a wonderful vacation and an insightful, educational experience. Our expert speakers cover all topics: Health Care, Real Estate, Legal System, Immigration, Bringing Pets, Cost of Living, US Taxes for Americans, Non-Residency for Canadians, Living on the Lakeside, Investing in Mexico, Mexican Economy and much more… You’ll get everything you need to help you decide if Lake Chapala, Mexico is the place for you, plus have a lot of fun doing it. Retiring in Mexico couldn’t be better.

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2. Ensenada, Baja California

According to John Vogel of BajaWine.info, the major travel and info site covering the Valle de Guadalupre wine country in the greater Ensenada area, he says “In Ensenada, you have everything that a major city could have but it’s still a small family town” The weather is very temperate between 60 to 80 F mostly all year round. It’s never too hot or too cold in Enenada as it’s on the Pacific Coast in a bay so it’s somewhate shielded by direct ocean winds. For Expats, it’s an easy transition because Ensenada is really half Southern California half Mexico. Most speak English as the border is just 1 hour away. So travel back and forth is relatively easy. It’s a major benefit for those that want to live an Mexico lifestyle but still get the San Diego Chargers game every NFL Sunday for a little tailgating.

Pros

• Close to US Border
• Easy going beach weather
• Inexpensive
• Very little rain fall
• Family friendly city
• All kinds of events held almost every weekend

Cons

• Airport is in Tijuana about 1 hour away and San Diego International Airport is about 1 hour and 30 minutes away by car albeit, there is a border crossing that could take from 1 to 3 hours depending on time of day.
• Anti-septic Mexican culture meaning that the culture in Baja is more close to the USA culture as it’s a mixed culture. If you’re looking for authentic rustic old Mexico, Ensenada is NOT the place to be. This is San Diego South and the peoples of Baja are a hybrid of Mexico and USA.
• You must have a car to get around.

3. San Miguel de Allende, Guanajuato

According to Rebecca Fass of Singles of San Miguel de Allende, a local socialite and bon-vivant, San Miguel de Allende is “the most wonderful place on the planet”. This place is probably the most well-to-do city in all of Mexico. With world class arts, music, and amazing restaurants with the highest end peoples from all over the world, SMDA is the most equistite classy place to live in Mexico. So if your looking to hob-nob with the rich, famous, artsy types, and peoples who really hold their own at the highest levels, SMDA is the place to be.

Klaudia Oliver, Relocation Specialist in San Miguel says “I can´t speak for that many places in Mexico but I can certainly suggest that San Miguel is THE top destination. Why? Because there is an overriding sense of well being which permeates the inhabitants of this beautiful colonial town. There is a swirl of social events and it’s like a college campus for baby boomers with cultural and social activities constantly”.

Pros:

• Amazing Cultural Beauty
• Old Mexico Meets the Well Healed Traveler
• Small Town full of super interesting Internationally reknown people that you will get to know quickly
• English spoken everywhere
• 3 hours away from Mexico City and all it’s available big city offerings
• Friendly small town atmosphere
• Beautiful architecture and history.
• Excellent nightlife

Cons:

• Not close to major city or airport
• High Desert elevation means it’s cold in winter and hot in summer
• Extreme temperatures mean that in one day can go from high 80′s at high noon and then into the 40′s at night.
• Very expensive to live.
• Feels like living on a desert island since there is nothing within an hour away.
• Nearest airport is in the City of Leon; about an hour and a half away.

4. Guadalajara, Jalisco

The weather is amazing; Perfect really! Guadalajara is the 2nd largest city in Mexico. So if you are used to living in the city, then you will enjoy Guadalajara as it is the very best big city in Mexico. Guadalajara is NOT as inexpensive as it used to be but you can still find bargins if you look hard. Great shopping, malls, activities, and excellent perfect weather make Guadalajara the best city to live in Mexico.

5. Merida, Yucatan

An old colonial city in the heart of the Yucatan jungle. It is very hot and humid mostly all year round and so you must love warm to hot weather to enjoy Merida. Amenities are excellent. According to resident Expatriate, Randy Bowser, he says “I live in a very nice 2 bedroom house, living room, kitchen, dining room, 1 bath front and back yards and fully gated, I pay 3000.00 pesos a month, which translates to about 270 dollars. The water bill is 5 dollars a month and electric is about 50 bucks a month. Progresso, our closest beach, is a fabulous place to swim. It’s only a short 20 minute drive from the house. There are so many things to do here; art, markets, museums, theater and so much more”.

Merida is about a 4 hour bus ride from the major resorts of Cancun and Playa del Carmen. It’s a Mexican business working city where prices are low and life is excellent.

6. Riviera Maya, Quintana Roo

Welcome to the Jungle! The Riviera Maya includes Cancun in the North, Playa del Carmen in the center and Tulum in the South and all points inbetween.

According to Bil Mabra , an Expat who is a resident and businessman living and working in the Riviera Maya running of Mexico Real Estate, he says ” Even though the cost of living in the Riviera Maya is a bit higher than other areas of Mexico it is still way more affordable than any state in the United States or Canada. When you figure that when you retire you will need to adjust your life to be able to live on about 30% to 40% of what you were making each month when you were working full-time. Think about it, can you live comfortably on $1500usd per month where you are now? In Mexico you certainly can. Can you afford a housekeeper 2 times per week where you live now? In the Riviera Maya you can. Realistically if you own your home then your expenses will consist of utilities, upkeep, taxes, food and entertainment. A retired couple with an income of $1500 usd per month can live very comfortably in Mexico even in the Riviera Maya which is slightly higher than the rest of Mexico”.

Even with the real estate market in the U.S. Taking a huge dive, the properties in Riviera Maya are still cheaper. Consider buying something that is not right on the beach but possibly walking distance or a 5-10 car ride to the Caribbean ocean. Right now you can find 2 bedroom and 3 bedroom condos and homes from under $50,000usd to $200,000usd depending on your budget and your needs.

What can you buy currently near the beach in San Diego, CA or Miami/Ft. Lauderdale, FL for under $200,000usd? Chances is are if you do find something in that price range in those areas it will require major repairs or it might just be an empty building lot. A caveat to this is property taxes each year. How much are property taxes in the U.S.? Most homes and condos in the Riviera Maya the property taxes are less than 1% per year of the property value. Lastly, upkeep on your Mexican home will not cost you as much because the cost of labor is a fraction of what it is in other countries.

If you are retiring then a question everyone has is about health care.

In the Riviera maya there are 3 Top hospitals—2 of them are run by a group from Spain called Hospiten. The other is the American Hospital in Cancun. Hospiten is recognized for being a top notch medical facility the world over and is on par or above most health care facilities you find in the U.S. And Canada. Most of the Doctors and nurses that work at Hospiten are bi-lingual so even if your Spanish is not that great you can still communicate very effectively. There have been many old rumors and wives tales that have been dispelled over that last several years when it comes to healthcare in Mexico. Now it is an every day occurance for people to migrate from the U.S. To have all types of medical procedures—everything from cosmetic surgery to heart bypasses and everything in between are now common place in Mexico. Compare the cost of healthcare and medications in Mexico to the cost in other countries and you will find the cost is usually more than 50% less.

The Riviera Maya climate is tropical but the actual daily temperature does not vary that much from the winter time to the summer time. Yes, summertime there is more humidity and it gets hot but typically there are only 3 months of the year where it is very hot from July to September. A lot of people take their vacations during this time if they want a little break from the heat. The other 9 months of the year it is very comfortable.

Highs in the winter time are usually around 84 degrees fahrenheit with lows in the high 60s to low 70s. Highs in the summertime are typically around 93 to 95 degrees with more humidity in the hottest months. If you come from a colder climate it takes a few months to get acclimated but once you do it sure is nice wearing your shorts and flip flops in January and February.

Living in the Riviera Maya also allows many people to get in and out of the country very easy. There is an international airport currently in Cancun servicing many major cities daily in the U.S. And Canada. Another airport is now being built near Tulum, Mexico. Getting to and from the Riviera Maya of Mexico has never been easier. Depending on where you nee to go usually within a few hours you can be most places in the U.S. Or Canada.

As far as amenities go, how about going shopping at Wal-mart, Costco or Sam’s Club and then going to have lunch at Applebee’s? Yes, now in this area of Mexico there are mostly all the creature comforts which all of us have grown accustomed to such as high speed and wireless Internet, satellite TV and GSM mobile phones.

20 years ago, this was a small fishing community. From Playa del Carmen to Tulum. Now, because of the influx of European and Mexico City money, this area has exploded. This is good for many reason, people choosing to now move and live here, have all the necessary amities that one could need. The beaches are some of the best in the world. Miles and miles of white sand and beautiful Caribbean warm waters.

Because this area is the largest resort area in Mexico, many people who live and work are from elsewhere. So the area does NOT have long standing family ties like some of the older more established areas of Mexico. Thus, from a family friendly standpoint, this is NOT the highest rate place. But really, its’ the most beautiful as there is nothing like the beaches of the Riviera Maya. Nothing Compares! If you love the ocean and beaches, this is for you all the way!

7. Mazatlan, Sinaloa

Mazatlan is a local Mexican resort city. It is older, inexpensive, and has a wonderful older downtown with excellent cultural rustic Mexican life. Excellent seasfood in this very unique resort town.

8. Puerto Vallarta, Nayarit

Life in the pacific tropics is excellent in Puerto Vallarta. Lovely fun downtown, great restaurants. Prices are relatively high for Mexico and so its’ not for the budget retiree.

9. La Paz, Baja California Sur

Inexpensive city life on the Sea of Cortes. Near Cabo San Lucas, La Paz is a family friendly small city. It’s very hot so its’ not for those that love colder climates.

10. San Cristobal de las Casas, Chiapas

Randy Bowser, a well traveled botonist who’s live in Mexico for over 10 years says ” I lived in San Cristobal de las Casa for 1 year and have to say really liked it a lot. The truest of Mexican culture exists in San Cristobal. It’s 5000ft above see level. It does have a chilly feel to the climate year round but the beauty of the area is well worth the trade off. It’s not really a viable place to live for the younger generation but for those retiring from life and wanting a slow, relaxed, peaceful existence, then this would be the place for you. It’s a magicial place.

About the Author: Johnny Punish is a musical artist who has lived in Mexico for the past 11 years. Please visit his official web site at www.JohnnyPunish.com