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Dallas, TX
November 13, 2009, 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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Are We Seeing A Shift To The Middle?
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What's Hot Today: |
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U.S. stock index futures were pointing to a higher opening
on Friday morning. Global markets were fairly stable overnight.
Today's Economic Calendar:
- International Trade8:30 AM ET
- Import and Export Prices 8:30 AM ET
- Consumer Sentiment 9:55 AM ET
- EIA Natural Gas Report 10:30 AM ET
News For Thought
White House Council to leave. The second major change in the Obama administration
is on its way. According to The Wall Street Journal: "White House Counsel Greg
Craig is expected to announce as soon as Friday that he plans to depart his post
following a rocky tenure, two people familiar with the matter said. Mr. Craig,
the top lawyer at the White House and a close aide to President Barack Obama,
has helped lead the administration's efforts on several national-security policies
that initially enjoyed popular support but have since become liabilities for
Mr. Obama. These include the planned closure of the prison for terrorism suspects
at Guantanamo Bay, Cuba, and the release of Bush administration-era national-security
documents." This is the highest level Obama administration official to leave
so far.
Poll: GOP senate candidates helped by health care legislation. According
to The Hill.com: "Two Quinnipiac polls released Thursday show the leading GOP
candidates in Connecticut and Ohio growing their leads. Former Rep. Rob Simmons
(R-Conn.) leads Sen. Chris Dodd (D-Conn.), 49-38, and former Rep. Rob Portman
(R-Ohio) has opened his first leads over two potential Democratic opponents." The
poll is starting to confirm many of the general concepts and opinions that the
Rasmussen polls, often quoted here, have been saying for months. According to
The Hill: "President Barack Obama’s approval on the healthcare issue has slipped
in Ohio from 44 percent to 36 percent in the last two months, and now 57 percent
of voters disapprove of his handling of it. Voters also by a wide margin say
they oppose the healthcare bill, 55-36, after they were evenly divided, 44-44,
in September."
Federal Housing Authority sees cash "dwindle." According to The New York
Times: "The Federal Housing Administration, the government agency whose loan-insurance
programs have become a crucial source of support for the housing market, said
on Thursday that its cash reserves had dwindled significantly in the last year
as more borrowers defaulted on their mortgages."
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Are We Seeing A Shift To The Middle?
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Dollar Buying Could Be A Prelude To Change
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As we head into the weekend, there is plenty to think about.
Aside from a looming health care showdown, policy makers in Washington have
other things to wrestle with, while the stock market is starting to struggle.
So is it a case of end of the year neglect? Or are the markets starting to
sense that something less than savory is on its way?
The first important change is that the Obama administration has cut two controversial
figures in the last few days. First, Anita Dunn, the White House communications
director, whose controvesial remarks about Fox News ignited a fair amount of
criticism to the administration resigned. Now, the White House Counsel Greg Craig
is leaving. Mr. Craig's major calling card in the administration has been Guantanamo.
Clearly, there is something stirring in the White House. With the president's
popularity falling, the unpopular health care bill grabbing all the headlines,
and the Fort Hood attack recalling for many the emotions of 9/11, the White House
may be shifting gears.
The timing is not surprising. The mid-term election is a year away, and the polls
are clearly pointing to some kind of reversal for the Democrats. The losses in
governor's races in Virginia and New Jersey, along with a potential reversal
in New York's 23rd Congressional district, which may happen if absentee ballots
push the vote total toward the Republican candidate are clearly sending a message.
The lack of jobs, the continuation of worsening conditions in some states, such
as Michigan and California, and New York's potential bankruptcy are starting
to jolt the White House into some sort of reality.
The problem for the White House is that it may not be able to shift toward the
center, the traditional governing place for most presidents, at least on economic
policy.
And there may be more trouble on the way for Mr. Obama. As time passes, the Federal
Reserve is going to have to raise interest rates, even if nominally. And some
are suggesting that the central bank may raise rates as the 2010 mid-term electins
near.
According to The Wall Street Journal: "Economists in the latest Wall Street Journal
survey, on average, expect the Federal Reserve to raise interest rates around
September 2010, a politically sensitive time considering midterm elections will
be right around the corner and unemployment is forecast to still be over 9.5%."
The Fed will likely want to make the move at a point in which it's not seen as
trying to affect the election. That means that the September date is probably
the last chance that it will get.
But the Fed may not get its chance. If current trends continue, such as job losses,
no interest in borrowing by business, and a continuation of the trend toward
higher regulation in Washington, the economy may not be any better by late 2010.
At that point, it's likely that events would be out of the hands of politicians
and the election would run its own course based on voter perception.
Conclusion
If the leaving of two fairly high profile White House officials is any clue,
Mr. Obama may be trying to move toward the center.
If the controversial health care reform legislation passes in any form similar
to what is out there now, it's likely that the White House will have trouble
and the Democrats, barring a change in current polls, will suffer at least moderate
losses in the election.
The markets may be starting to weigh in on this. The key is the dollar, which
is clearly trying to bottom. Here's the cynic's point of view. If the Democrats
start to wobble, the potential for gridlock increases. Gridlock will give businesses
a chance to breathe and perhaps customers a chance to exercise some pent up demand.
In our opinion, if the dollar mounts a significant rally, it's likely the beginning
of the markets factoring in a shift to the middle, by the White House, by Congress,
and maybe by the economy.
Know when to sell and how to make money when the market falls. Get a detailed
trading plan in your pocket. Read 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. |
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Market Moves - Stock Of The Day
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DB U.S. Dollar Bull ETF (NYSE: UUP) May Have Bottomed
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The DB U.S.
Dollar Bull ETF (NYSE: UUP) is showing signs of a potential
trend reversal.
Chart Courtesy of StockCharts.com
If the action we saw on Thursday continues, the dollar
may have bottomed. To be sure, it's early. Yet, the action
seemed fairly convincing.
First, there was no big news that showed any economic strength. That means that
the dollar is now very oversold, to the point where it can bounce fairly high
without news.
Second, the UUP's chart shows a double bottom, confirmed by improvement in the
RSI and MACD oscillators.
Next, UUP crossed above its 20-day moving average and is now contesting the area
near its 50-day moving average.
That means that buyers are coming into the ETF, as they are coming into the dollar.
The next big test is the 23 price area. If UUP closes the week above 23, next
week's action will be crucial.
We are neither recommeding the sale or the purchase of UUP. The purpose of this
article is to educate subscribers as to the presence of an interesting trend
in the market. Dr. Duarte does not own shares of UUP but may own shares in the
future.
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Technical
Look at the Market |
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S & P May Be Forming A Double Top
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The S & P
500 again continues to struggle in its attempts to rise
above 1100. The index failed again on 11-12, and is in
danger of forming a double top.
This is still another example of how tough the 1100 resistance area is for traders.
If and when this area is breached, we would expect a short term move of some
magnitude to develop.
Sector selection is important, but remains fleeting. Investors who are nimble
with individual stocks are likely to fare better than indexers in the next few
weeks as the rally becomes more narrow.
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
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