Investor confidence and market direction can be predicted just by watching the inflows and outflow of money from large mutual funds. When money floods the street, prices become inflated and stocks rise, an outflow causes large drops in stock prices as equity is taken out. After the last few months of decline, it is now apparent that outflows are huge. Investor confidence in big banking and anything related to mortgages are at all time lows.

A quick glimpse at a four week chart shows that equity funds tanked in February with the weekly outflows topping $12 Billion. Investors lost confidence in the market and thus started taking cash out of stock funds and at the same time loading up in money markets. While stock funds tanked, money market funds were taking in an extra $40 Billion a week. This shows that investors only felt safe in guaranteed return investments, even if the yield was as low as 3-4% per year.

Bond funds dipped at the same time as stock funds, either investors lost confidence in corporate holdings or they were wary of mortgage backed securities which are essentially mortgage debt repackaged as a bond. The monthly repayments of the mortgage were used to secure the bond interest, but as that money slowly dries up, the possibility of repayment drops.

Coincidentally the amount invested in money market funds has dropped with every FED rate cut, but the figures still remain positive. Net inflows to money market accounts were around $15-20 Billion a week, half as much as they were before the FED rates were dropped. Throughout the latter parts of February and into March, investors turned away from money markets and bought back into the market at bargain basement prices. Up until this week, there were heavily inflows of cash to equities of about $4 Billion a week, still much lower than money markets.

It appears that investors have again begun to take money out of equities and now back to money markets. From this viewpoint it looks like investors will start fleeing the market again, probably in droves when the Dow and other large indices drop. The impressive gains from last week are going to be wiped away if investors continue this sell off.

Watching these key statistics can help you better time the market. When the inflow/outflow statistics are weighted by a 4 week moving average, the charts flow smoothly. Very rarely do the charts move down and then back up, instead they move down and keep moving down or move up and continue up. This shows that the market is following the returns, investors don’t know where to put their cash.

Gauging just a few months history, equities are going to get killed in the coming weeks. Inflows topped at $7 Billion a week and now down to just $4 Billion a week, next week will probably go negative. If this continues, the next month will be filled with more 200 point losses. Hold on tight.

The approval of the XM-Sirius merger is now complete and both companies plan to work together to sell satellite radio subscriptions.  The companies both sell proprietary equipment that can access only the satellite radio provided by each company but now after an agreement is made the two hope to sell a package of both XM and Sirius channels for just $16.99 a month.

The companies both had the ad-free claim to fame that is popular with music and sports enthusiasts.  For just a small fee of $6.99 consumers were able to get 24/7 ad free programming of music and sports from a variety of stations offered by the companies.  Now that the merger is complete it should be possible to get programming from both companies without having two devices.

There was some serious lobbying in the merger, broadcast radio lobbying firms were adamant about keeping the merger from completion.  The lobbyists wanted to convince consumers and regulators that this would prevent competition and create a monopoly.  XM and Sirius made the case that the satellite radios were still in competition with broadcast radio and had a reason to keep prices down in order to win customers.  XM and Sirius must have been very convincing as the merger will go through, even with two giants in one industry.  The new company will not have any competition in the satellite radio industry.

XM and Sirius should be able to achieve profitability as they will no longer have to spend billions in advertising to put each other out of business.  Since their inception, neither satellite radio provider has made a profit.  In fact, both companies are on the brink of being grossly unprofitable.

We’ll have to see what the companies can do after the merger, at this point its anyone’s game.  The duo are facing huge losses and a limited customer base but have plenty of room to grow.  The balance sheets should look better after the two merge and cut costs, hopefully gaining customers in the meantime.  I’d hold here, no new positions until we see a lively balance sheet.

The Yuan or Renminbi is the Chinese currency and might as well be the next hot investment.  The run into metals, commodities, oil and the Eurozone has brought huge gains to those areas, but the Chinese Yuan is something that has yet to be exploited.

The Renminbi was subject to a peg to the dollar for decades.  The old peg was valued at about 8 Renminbi to one US Dollar and was in effect to keep a low Chinese currency value.  If the currency was always devalued against the dollar, US consumers would look first to China for the production of goods.  Thus so many “Made in China” stickers appear on virtually everything you own.  The drop in the dollar’s value went unnoticed against the Yuan because its always been pegged to the US Dollar.  Never has it been allowed to free float against the USD so its value has remained the same.  Lately, the Yuan has been on top of the headlines as the main reason for the large trade deficit between the United States and China.

Now that the economy is on the forefront of political discussion it has been made public that US legislators are looking for a way to let the Yuan free-float against the value of the dollar to bring back the manufacturing base to the United States.  The currency is being artificially devalued in an attempt to keep China’s booming manufacturing district, well, booming.

One proposal was to create an import tax on Chinese goods to make them more expensive to US consumers and thus, force companies to send the manufacturing jobs back home.  In response, China allowed its currency to now float against a “basket” of different currencies including the pound, euro, and 6 other large currencies.  At the font of the basket is around a trillion dollars worth of US Treasuries which has for the most part maintained the value of the Yuan to about 7 Yuan to the dollar.

If the market were to let the Reminbi free-float, an instant 30-40% correction is expected.  Economists predict that the value of the Yuan would jump quickly to 4-5 Reminbi to the dollar, instead of today’s value of around 7 to the dollar.

It is certain that the Yuan will eventually be set to free float.  The new tax legislation and pressure from the rest of the world to go to a floating currency will eventually send China to let the currency float.  When it does, huge overnight gains will occur for anyone with a position in the Chinese currency.

Everyone should have some exposure to the currency market by making a direct investment into the currency, buying Chinese stock such as Petrochina or taking a position on the spot markets.  I would recommend making an investment on the spot markets through Oanda forex.  With Oanda, it is possible to enter a position at 30:1 leverage, meaning it will only cost $100 to control $3000 of currency.  A modest investment of $1000 to buy $15000 in Reminbi would be suggested as this provides a position against the currency and provides a great return if the Reminbi does get revalued.

A move from 7:1 to 5:1 would mean that the value of your investment ($1000) would turn into $5500 if the currency was revalued to 5 Yuan to the dollar.  Using $1000 to buy $15000 in Reminbi has a huge upside potential with the only possible loss of $1000.  Get in, its inevitable.

There is absolutely no reason to be pulling equity from the markets.  Rate cuts by the Fed have dropped interest bearing accounts to new lows, this is certainly not the time to be in cash.  Inflation is reaching 4-5% per year, its not the time to be invested at 2% per year.

Oil companies are looking very cheap when compared to other stocks.  Their revenue stream will continue for years to come as oil prices are unlikely to drop.  The only risk at these prices is a higher corporate tax, but the current administration is opposed to tax hikes.  I like Rowan (RDC) at this price.  With just a PE ratio of 8 and a growth rate of 16%, this is the best investment you’ll find in the oil market.  Rowan makes their own rigs to rent and sell to various refiners and exploration companies in the Gulf of Mexico and more recently off the coast of Africa.  They rent rigs for a daily rate in the hundreds of thousands of dollars.  Oil rigs are in short supply and the bidding wars intense, just last year Rowan moved a number of rigs to Africa where they get up to three times the rate Rowan was getting in the Gulf.  Oil companies are the place to be.

Next positions are mining stocks.  Mining companies make money regardless of current price because they enter contracts well before delivery date.  Some companies  refuse to enter these contracts and have benefitted greatly from higher prices.  Stocks like Gammon Gold do not contract price for gold or silver and thus always sell at market price, which has been remarkably high.

With the economic stimulus package right around the corner, it might be smart to make a few speculative plays on which stocks are likely to benefit the most. Home Depot and Loews are on the top of my list.

Eligible people will receive a $600 “advancement” on next years taxes, plus $300 per dependant. A family of four would receive a check totaling $1800, provided they don’t earn over the criteria.

With this amount of money fresh in the hands of consumers, chances are that a very select few will save it and the remainder will blow it on something. Home improvement stores top my list because the amount ($600) is about the price of most big appliances and summer home improvement ideas. The checks will come just in time for summer and things like lawn mowers, new air conditioners, a variety of landscaping elements etc.

To profit from this, we’ll have to see a very good quarter come out of either stock. Out of the two mentioned, Home Depot is well off its highs and looks a lot better for a turnaround than Loews. For example’s sake, lets suppose we want to invest in Home Depot.

In this particular scenario, it is a lively quarterly earnings report that we want to see out of Home Depot. Because quarters are compared to the previous year quarter, it is very likely that Home Depot will destroy last years earnings. No economic stimulus last year, $155 Billion stimulus this year. Got it?

To maximize our returns and limit the downside, we’ll elect to buy January 09 call options with a $20 strike price for just $9.10 each. This can also be used to further leverage our position, but its better just to limit the downside if HD happens to fall off a cliff.

The timeframe to January 09 also gives some time to sell when we want, rather than be tied to just a few months after earnings announcements. Good earnings in the second quarter could easily carry into the third and beyond, it really just depends on how effective this economic stimulus is.

Consider buying some Home Depot calls as a quick way to make some money when the economic stimulus package goes through. This is certainly one store that will benefit the most from the $155 Billion burning a whole in the public’s pocket. That $155 Billion has to go somewhere, I think it will go to the home improvement stores.

Google has been very quick to respond to the overall markets, it seems as though it is easily affected by the market rather than its own inner workings.  The company topped out last November with a share price of $750 only to find itself to be at $430 just four months later.

Prior to the fallout from $750, Google had never managed a significant move down.  A quick look at a Google chart will show that the price has never made significant, quick drops but rather rose at a very linear pace until November, where it began to spike.  This tells us that the spike was due to mal-investment that led to large profit-taking and short selling.  Google’s drop in price has very little to do with the internal workings of Google and more to do with trading.   Traders were quick to drive the price up then back down, something that hadn’t happened in the two years prior.

Now that Google has shed about 40% of its value, this might be the place to buy in.  For the first time, Google trades at just 32 times earnings with a PEG ratio of .61.  It is very rare that you every get into a growing internet company with a 53% growth rate for just 32 times next years earnings.  At this rate, Google is set to reach a blue-chip PE level within the next couple years.

While the world might be entering a recession, internet traffic is not slowing, nor is the need to advertise on the internet.  Google boasts low overhead costs and is very well prepared to continue working even through economic slowdown.  Its ad sense program extends all over the internet and the world, profiting from the day to day currency flux.

Large offers for Yahoo make Google look even more attractive.  Microsoft and Yahoo have yet to even come close to Google in textual advertising.  Yahoo has produced a similar program but has been in beta for two  years while MSNs marketing program never really gained traction.  Google has the key to the text based advertising market and is unlikely to give it up.

All in all, Google looks like a great investment.  A PE ratio of 32 and growth rates in the 50s tell us this is one for the long term.  Look to buy on the dips at this price.

Many commodities posted notable losses today, especially oil which was down to $106 from $110 per barrel.  The brief sell off is said to be about looming worries of the US Economy, if the economy slows so will the demand for oil.

It seems that the US had economic woes when oil moved from $70 to $100, now the same worries are causing a drop in price.  The drop in price is probably related to something much more logical, the sell off by investment banks to cover losses.

After the collapse of the lending industry and many mortgage backed securities falling drastically in value, some investment banks have had a considerably hard time meeting margin calls on stock holdings and investments.  The mortgage backed securities dropped enough to topple Bear Sterns which was said to be unsinkable due to its size.

After a short run in oil prices, it seems like institutions are dumping oil to cover their positions in the stock market.  The last few weeks on the exchange have been particularly rough and might soon reach the bear market threshold.  Institutional traders and investment banks look quick to take money off the table in the commodities market to pump up their weak returns on the stock market and in the home lending business.

$110 appears that it will be the new price to beat.  As consumers, we’re lucky to finally have an idea of resistance again.   The banks are likely going to be selling positions and even short selling around $110 per barrel.  The $110 is psychological, it seems as though $110 per barrel is much higher in cost than a $100 barrel of oil.  In the future, $120 and $130 oil will probably be thought the same, although we aren’t there yet.

I’m expecting a moderate price for oil in the next couple weeks, it is likely that oil will retreat to stay in the $100-$110 range.  A fall through $100 or upticks through $110-$111 are highly unlikely, at this point it looks like there is a lot of buying at $100 and plenty of selling at $111.

This is the guest post by Heather Johnson who is a freelance finance and economics writer, as well as a regular contributor for CurrencyTrading.net, a site for currency trading and forex trading information.

There is a reason why the majority of people steer clear of the stock market – it’s a scary place to be sometimes. Even the most seasoned traders can let their fears or negativity get in the way of good judgment. Those of us who have fallen from a great position know what it’s like to have it all in our hands and lose it in an instant.

Well, that’s enough doom and gloom for now. Being pessimistic in a negative market can only lead to more trouble. Before you know it, you are so scared to trade that you become blind to some really great money opportunities. Below, you will find 10 tips to staying positive when enduring a bear market.       

1. Keep things in perspective, as a smart investor is in this for the long haul.    

2. Ask yourself how things will look in 5 years or 10 years from now. If you’ve followed that golden rule of diversifying with predictable stocks, then your horizon shouldn’t be so grim.    

3. Neglecting your physical health will only make your judgment worse during a crucial time. Eat right, get as much sleep as you can, and try to fit in some exercise to reduce stress.    

4. Don’t overdo it when the results of your trades begin to die down. Scrambling around in an unpredictable market could only make that headache worse. Back off a bit, pullback some money and collect yourself.    

5. If you are a professional trader and feel your job security is at risk, tell yourself there are other jobs out there, should it come down to that.    

6. Remember that you aren’t in this alone. Speak with some trusted colleagues or even reach out anonymously to discuss your frustration on an online financial message board.    

7. Equate optimism with longevity, as you won’t last very long in the market with a downbeat attitude.    

8. Read some literature on the power of positive thinking. There are plenty available that specifically relate to personal finance.    

9. Take a vacation, even if it’s for the weekend.    

10. Remember the oldest cliché in trading: go with the flow. Everything swings back eventually.    

Is it easier said than done to just wait out the hard times? Certainly it is, especially if you are going to experience big short-term loss or even problems with your job security. However, trading with a negative attitude will always snowball into making poor decisions.

Also, it just doesn’t help the problem at all to be pessimistic. You knew, going into the stock market, that times could get rough. Remember, you should be in this for the long run.

Take this weekend for a short glance at your retirement portfolio.  I’m willing to bet that your domestic investments have gone down the tubes while your overseas investments are looking great.  This weekend would be a great time to reallocate your investment dollars.

I’m not at all suggesting to take profits overseas, the run against the dollar is hardly over.   I am suggesting that you get out of financials, out of home building and out of anything you see as borderline luxury.  Its time to go recession proof before the R word starts getting tossed around.

Many portfolios evade the commodities market.  In a time like this you want exposure to commodities that are actually hedges against the dollar.  Oil, gold and silver are a good place to start.  It might seem like these three markets are in a bubble, but you haven’t seen anything yet.  Silver is the best investment of the three as it still has a long way to run.  The short positions on silver are innumerable and the sticker shock won’t set in until a major move.

Go overseas.  Your next look should be to focus on international investments or companies that have done a significant amount of business overseas.  McDonalds and Coca-Cola are two stocks that stand to do well even in a cooling market.  Both McDonalds and Coke have a large marketshare all over the world.  Coke generates more in its overseas operations than domestically and McDonalds still has plenty of room to grow in the Asian market.  Both companies will prosper from a weakening dollar and economy here at home.

While homebuilders might be looking like a bottom, the supply of homes is seriously inflated.  Homebuilding will not pick up until the economy swings back into full momentum.  The lower rates and $200 Billion infusion has yet to make it to everyday people.  When it does, we might see a small increase in home ownership.  There is plenty of supply out there and very few buyers, if the credit crunch continues down its beaten path the amount of foreclosed homes will flood the market.

No CD’s,  no money market, none of that fixed income stuff.  Fixed income investments are destroyed by inflation.   As the Fed continues to print more money, inflation will rise to ultimately dwarf the returns on fixed income.  When deflation occurs, fixed income is the perfect investment.  A stacked money supply is dangerous to your fixed income.

Absolutely no cash.  There is no reason to be holding cash right now.  There are plenty of worthwhile investments here and abroad.  Consider taking some cash to invest in hard metals or other assets that are inflation proof.  Artwork, collectibles etc are likely to rise with the rate of inflation and can be used to make the house look great in the mean time.  Hard assets are important for any portfolio.

After a rally like we had yesterday, today’s minor sell off could be expected.  A 400 point movement by the Dow is no small figure,  it is likely that today’s drop was led by profit taking.’

Something you’ll hear a lot about is a small movement after a large day.  It is very common that after a large movement up, the market will trade near 0 for the next day.  People buy in and out of large rallies, causing a turbulent day right after.  Yesterday the Dow was up more than 400 points, today it was down 45.

This likely occurs because people place orders for the market open.  Through midday, the market was up 150 points but tapered off as profit-taking started a sell off.  The cash strapped investment banks probably led the decline by selling off large portions of their holdings to raise cash.

The problems with the mortgage industry is causing banks to sell their positions to raise cash.  Visa’s $18 Billion IPO looks more like a sellout rather than a public offering.  The banks are unloading Visa for two reasons, they’re flat broke and Visa is extremely volatile to recession.  The credit card industry is likely to be caught holding the bag on billions in bad debt.  Unsecured loans are often the first loans in default stage, and mortgages one of the last.  If there are 3 million homes in foreclosure, its probable that there are a lot more credit card accounts in the same situation.

Electronic trading should be partly to blame.  The availability of the markets to round the clock orders makes days like this that much more likely.  The quick gains of yesterday are sure to be cashed in, we won’t see a day like that in quite some time.  Some might attribute today’s sell off to worries about inflation.  The market should go up in times of inflation rather than down, so I don’t think that is the case.  The $200 Billion lending package has certainly made a mark on the financial markets however.

Commodities were up on a weakening dollar.  The dollar now trades at 1.55 to the Euro and nearly $1000 for an ounce of gold, and $110 for a barrel of oil.  The FED loan package likely cause the drop in dollar demand and boosted commodity prices.