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Dallas, TX
July 10, 2008, 08:00 EST |
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Dr. Joe Duarte's Market I.Q. |
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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Iran Contra: Bush Style?
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What's Hot Today: |
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Late selling on Wall Street led to moderate selling in Europe and Asia
overnight. But the U.S. pre-market futures were pointing to a flat opening.
We don't like this market's Jekyll and Hyde act, and remain mostly in cash until the big guys can sort out which way they want to take it.
Today's Economic Calendar:
- 8:30a.m. Initial Jobless Claims For Jul 5 Week: Expected: +6K. Previous: +16K.
- 10:00a.m. DJ-BTMU Business Barometer For Jun 21: Previous: -0.3%.
News For Thought
Fannie Mae and Freddie Mac are on the White House's radar screen. According to The Wall Street Journal, the White House and the Treasury Department have been holding talks about the two entities in case they reach a point where they can no longer function due to the potential effects of not being able to raise capital as well as being burdened by too much debt from unpaid mortgages.
According to The Journal: "Fannie and Freddie's health is of deep concern to policy makers because of the critical role they play in the housing market. The two companies own or guarantee about $5 trillion of mortgages or nearly half of all U.S. home-mortgage debt outstanding. The government has increasingly leaned on the companies to provide critical stability to a housing market crippled by falling home prices and banks too nervous to lend."
In essence, Fannie and Freddie 'can't be allowed to fail," said Peter Wallison, a former Treasury Department general counsel. "The losses would extend through so much of our economy, and so much of the world economy. There is simply no way that the United States government can let it happen."'
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Iran Contra: Bush Style?
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Report: While The Missiles And The Taunts Fly..Behind The Scenes They're Talking..And Making Big Deals
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The price of oil fell for two days running because the U.S. and Iran are having
secret talks and one of the agreements is that neither side would let the price
of crude oil rise above $150 per barrel, says Debka.com.
In what Debka, the highly sensational, but sometimes accurate Israeli "intelligence" web site that some say is a propaganda arm for the Mossad, describes as "talks between the US and Iranian delegations, representing President George W. Bush and Iranian supreme ruler Ayatollah Ali Khamenei," several key, yet "ad hoc" agreements have been reached.
Citing the inevitable "exclusive Gulf and Iranian sources" Debka reported that the U.S. has been "leaking" information to the media as part of its agreements with Iran, and thus keeping Israel from attacking Iran. Of course, as usual, nothing is set in stone and "neither nation has sheathed its military option" as the "understandings are ad hoc and could well break down in the volatile climate generated by hard-line elements of Iran’s Revolutionary Guards, which are dead against deals with Washington."
And if you're looking for more interesting stuff, try this. Debka says that Iran has played a significant role in the U.S.'s ability to make inroads against Al-Qaeda in Iraq, as "Tehran ordered Iranian intelligence officers working undercover in Iraq to halt attacks on US troops by pro-Iranian militias, including Moqtada Sadr’s Mehdi Army," a fact that "has left US and Iraqi government force with free hands for large-scale operations against al Qaeda."
Furthermore "Iranian officers are also sharing useful intelligence on conditions in the field with American commanders," as the purpose of the excercise is "the Bush administration’s ambition to help fellow-Republican Senator John McCain get elected to the White House."
And to back that claime, "DEBKAfile’s Iran experts comment that the revolutionary regime in Tehran has traditionally preferred a Republican over a Democrat in the White House since the days when its founder, Ayatollah Ruhollah Khomeini, helped Ronald Reagan defeat Jimmy Carter." According to Debka, some of the agreements reached between Reagan and Tehran are still in place, and the White House is making use of them.
Conclusion
As far fetched as it sounds, this is plausible. After all, Iran-Contra did happen, and it happened with a Bush in the White House, albeit as the Vice President. And it is known that the U.S. and Iran have been having both up front as well as behind the scenes talks for years.
More important, the plausability of the scheme also fits the way the two day mini crash in oil happened, seemingly out of nowhere, just as things happen when a big hedge fund has to meet a margin call and sells big positions in a hurry.
Third, Debka also makes another interesting point that makes sense. Since these talks have supposedly been ongoing for some time, during which the situation in Lebanon, in which Iran and Syria have a big hand, have also calmed down.
So, if Debka is correct, the U.S. has had a big turnaround in the way it views Syria and Iran, and the repercussions of such a development, if indeed it is true, will be significant.
According to Debka, citing a Saudi source “A US-Iranian earthquake is rumbling under the surface of the Middle East, especially in Syria.”
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Technical Summary: |
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Chart Courtesy of StockCharts.com
Volatility Warrants Cautious Stance
The S & P 500 is gyrating fairly wildly which means that big money is trying to make something happen. It's never a good idea to get in front of a freight train.
We've traded well lately and have some profits to show for our efforts. This is a good opportunity to rest up and let the market sort itself out before jumping back in.
There's nothing to do here but wait to see what happens in the next couple of days.
The key is still what happens with earnings reports and other developments such as the ongoing banking and liquidity crises.
The key resistance to prices, even if a major rally develops, remains the 200-day moving average, near 1410, above. Any bounce would likely run into trouble at that point.
Chart Courtesy of StockCharts.com
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Market Moves - Stock Of The Day
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SPDRs (Amex: SPY) and Diamonds (Amex: DIA) Hold Their Ground
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The headlines were sensational but the SPDRs (Amex: SPY) and Diamonds (Amex: DIA) did not make new lows on 7-9, which leaves the door open for the market to bounce.
Chart Courtesy of StockCharts.com
Despite the hoopla about the Dow Jones Industrial average falling to new bear market lows, the charts show that the major indexes did not make new lows for this move.
In fact,the S & P 500 needs to take out the 1240 level to qualify for a significant new low, and there are lots of reasons for the market to bounce.
For one thing, things are getting way overdone on the bearish side. One example is the CBOE's Put/Call ratio, a measure of investor optimism. The number has been above 1.0 for the past three days of market volatility. Such numbers, sometimes for one day can point to market bottoms.
For another the media coverage is so sensational that the pendulum has swung a bit too far to continue to hold short positions.
Indeed, the best place to be, due to the market's volatility, and the media hype is in cash. That could change in the next few days, as the market could either bounce or indeed break to new lows.
But for now, the best place to be is mostly out of the market, except if you have any positions, either short or long, that continue to act well.
Make money whether the market rises or falls. Get Dr. Duarte's All NEW  "Trading Futures For Dummies." The Trading Manual for All Seasons. Updated, revised includes new charts, and full chapter on ETF timing.
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