Dallas, TX
May 15, 2009, 08:00 EST
Dr. Joe Duarte's Market I.Q.


The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors


No More War On Drugs
What's Hot Today:
U.S. stock futures were lower in early trading. A busy event calendar, see below, will likely add some volatility in the early part of the day. Otherwise, it's a May Friday, which means that lots of folks will be trying to head out early.

Today's Economic Calendar:
  • 8:30 a.m. Apr Consumer Price Index: Expected: 0%. Previous: -0.1%.

  • 8:30 a.m. Mar Consumer Price Index, ex-food energy: Expected: +0.2%. Previous: +0.2%.

  • 8:30 a.m. Apr Empire State Fed Manufacturing Survey: Expected: -10. Previous: -14.65.

  • 9:00 a.m. Feb Tsy International Capital: Previous: -$148.9B.

  • 9:15 a.m. Mar Industrial Production: Expected: -0.6%. Previous: -1.5%.

  • 9:15 a.m. Mar Capacity Utiliztion: Expected: 69%. Previous: 69.3%.

  • 10:00 a.m. Mid-May Reuters/U Mich Sentiment Index: Expected: 67. Previous: 61.9.
News For Thought

Insurance Industry Shows Signs of Strain. As the banking sector shows the potential for some stabilization, the insurance industry, aside from AIG (NYSE: AIG) may be the next sector to hit the skids. According to The Wall Street Journal the Treasury Department will make $22 billion worth of TARP money to the insurance industry.

According to the report: Prudential Financial Inc., Principal Financial Group Inc. and Lincoln National Corp., along with Allstate are all slated to receive funds.

Immigration from Mexico to U.S. "Plummets." According to The New York Times, citing data from the Mexican Census: "226,000 fewer people emigrated from Mexico to other countries during the year that ended in August 2008 than during the previous year, a decline of 25 percent." Most of Mexico's immigration is to the U.S. The report added that "The trend offers new evidence that illegal immigrants from Mexico are drawn by jobs and stay away in a bad labor market."

No More War On Drugs
Movement Away From Law Enforcement Ahead

The Obama administration's drug czar is likely to chart a course away from law enforcement as the centerpiece of action against illegal drugs, a dramatic change from prior administrations.

According to The Wall Street Journal: 'The Obama administration's new drug czar says he wants to banish the idea that the U.S. is fighting "a war on drugs."' Gil Kerlikowske, the newly confirmed head of the White House Office of National Drug Control Policy told the Journal that the bellicose analogy was a barrier to dealing with the nation's drug issues adding "Regardless of how you try to explain to people it's a 'war on drugs' or a 'war on a product,' people see a war as a war on them. We're not at war with people in this country."

As the Journal points out "Mr. Kerlikowske's comments are a signal that the Obama administration is set to follow a more moderate -- and likely more controversial -- stance on the nation's drug problems. Prior administrations talked about pushing treatment and reducing demand while continuing to focus primarily on a tough criminal-justice approach."

According to the report, major changes are coming in the U.S. drug policy. Two examples are illustrative. For one, "the administration has called for an end to the disparity in how crimes involving crack cocaine and powder cocaine are dealt with. Critics of the law say it unfairly targeted African-American communities, where crack is more prevalent." Second, "The administration also said federal authorities would no longer raid medical-marijuana dispensaries in the 13 states where voters have made medical marijuana legal. Agents had previously done so under federal law, which doesn't provide for any exceptions to its marijuana prohibition."

Mr. Kerlikowske has a background commesurate with the new shift in policy. He "was most recently the police chief in Seattle, a city known for experimenting with drug programs. In 2003, voters there passed an initiative making the enforcement of simple marijuana violations a low priority. The city has long had a needle-exchange program and hosts Hempfest, which draws tens of thousands of hemp and marijuana advocates."

This is likely to be a powder keg at some point. According to the Journal, Seattle police officers under Mr. Kerlikowske "drug enforcement -- especially for pot crimes -- took a back seat, according to Sgt. Richard O'Neill, president of the Seattle Police Officers Guild. One result was an open-air drug market in the downtown business district." According to Sgt O' Neill: '"The average rank-and-file officer is saying, 'He can't control two blocks of Seattle, how is he going to control the nation?'"

Alison Holcomb, drug-policy director with the Washington state American Civil Liberties Union, expressed a different viewpoint, noting: "I think he believes there is a place for using the criminal sanctions to address the drug-abuse problem, but he's more open to giving a hard look to solutions that look at the demand side of the equation."

Conclusion

Drug abuse is highly complex and controversial. But it is linked to organized crime. And if Mexico's experience is worth anything, it can be a threat to national security.

Mr. Kerlikowske's views and future policies are likely to be controversial. Yet, as they are acted upon by Congress will influence the lives of Americans, as well as leading to international consequences.

The Southwest U.S. is a dangerous place in many areas, especially along parts of California, Arizona, New Mexico, and Texas. The number of kidnappings, murders, and general rise in crime in those areas is clearly linked to drug trafficking and other related activities, such as human smuggling and white slavery.

No matter how you vote, this is an important issue, which is just starting to get interesting. So as the budget, Medicare, health care and Social Security grab the spotlight, it's likely that this change in policy will likely skate through Congress, which means that yet another landmark change in the way we live is on the way.

Get Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for All Seasons. Also Available As Kindle Books.

 



Market Moves - Stock Of The Day
S & P SPDR (NYSE: SPY) and Powershares QQQQ (Nasdaq: QQQQ) ETFs Test Key Support
The S & P SPDR (NYSE: SPY) Powershares QQQQ (Nasdaq: QQQQ) may be heading lower.



Chart Courtesy of StockCharts.com


Both ETFs are key benchmarks for investors, as they track the S & P 500 and the Nasdaq 100 indexes respectively. In a sense, though, they are more direct measures of investor activity, as they are vehicles through which traders directly place their bets on 600 large cap highly liquid stocks.

Over the last week, both QQQQ and SPY have been struggling, which is a sign of fading investor confidence. On Wednesday the market took a big tumble, with a mild recovery on Thursday. But as the news of renewed action from the government on health care, the dolling out of TARP funds for the insurance industry, and reports of aggressive action against Chrysler with regard to the firm's advertising budget, the market is clearly in retreat mode.

Aside from external influences, the stock market has had a huge run since March, and profit taking is inevitable.

What should be of concern, though, is that these two benchmarks, SPY and QQQQ, are starting to show signs of distribution, which means that there are starting to be more sellers than buyers more often during the trading day.

That's a sign of weakness, and sign that, as investors, we should be very careful in the near term.

 


Other Subscriber Reports are located on the website (log in required). These
reports are updated on a weekly basis (or as conditions require) and are not emailed:

S&P Timing & Large Cap Growth /  Bond Timing /  Dollar Timing /  Energy Timing
Gold Timing /  Fallen Angels Portfolio /  Tech Timing Models /  Health & Biotech


© Copyright 1996-2009, Kollar Market Analytics, Inc., All Rights Reserved.
  • Market IQ reports may not be redistributed without permission.
  • Disclaimer: The financial markets are risky. Investing is risky. Past performance does not guarantee future performance. The foregoing has been prepared solely for informational purposes and is not a solicitation, or an offer to buy or sell any security. Opinions are based on historical research and data believed reliable, but there is no guarantee that future results will be profitable.