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Dallas, TX
December 21, 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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Three Issues To Consider As The Year Winds Down
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What's Hot Today: |
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U.S. stock index futures were pointing to a flat open
on Monday. Steady markets and a steady dollar overnight plus a light economic
calendar and low holiday volume could add to dull trading this week. Still,
anything is possible given the political climate around the world.
Today's Economic Calendar:
- 4-Week Bill Announcement 11:00 AM ET
- 3-Month Bill Auction 11:30 AM ET
- 6-Month Bill Auction 11:30 AM ET
News For Thought
Senate likely to pass health care "reform." The White House found Senator
Ben Nelson's price ove the weekend and the health care reform package is likely
to pass the Senate before the Christmas break. The compromise with the House
bill will likely get done in January, and it looks as if the president will get
to brag about his accomplishment by the State of the Union address. According
to The Washington Post, rising costs of the bill "would be more than covered
by nearly $400 billion in new taxes over the next decade and by nearly $500 billion
in spending reductions, primarily cuts to Medicare, the federal health program
for people 65 and older. All told, the package would reduce federal budget deficits
by $132 billion by 2019, according to the nonpartisan Congressional Budget Office."
The key to the "cost cutting" is that Medicare money will be transferred to Medicaid.
What the politicians fail to recognize is that most physicians are no longer
taking Medicaid due to the low reimbursement, high red tape, and high risk population
involved, both in terms of degree of illness and potential litigation. That means
that the government will either mandate physicians to take on Medicaid patients
or the number of patients either without care, or forced to go to emergency rooms
or public health care such as county hospitals will increase. No matter what
happens, this will likely shake up health care significantly, and will have unintended
consequences.
Mr. Nelson cut a hard deal, making Nebraska an oasis for government funded health
care. According to The Post: "Nelson also secured full and permanent federal
funding for his state to extend Medicaid eligibility to everyone below 133 percent
of the federal poverty level. The bill would require all states to do so, but
Nebraska alone would not be required to pay a portion of the additional cost
after 2016. And he won concessions for some nonprofit insurers and for providers
of supplemental Medicare coverage from a new insurance tax, and he was able to
roll back cuts to health savings accounts."
If you own a tanning salon, you'll probably see business diminished as a result
of this bill as "The package would rely on nearly $400 billion in new taxes,
including a 10 percent tax on indoor tanning salons to be paid by the customer,
and an increase in the Medicare payroll tax for people earning more than $200,000
a year and families earning more than $250,000."
Finally, the penalties for not having insurance stayed in the bill. According
to The Post: "The revised Senate bill would require every American for the first
time to obtain insurance or face a financial penalty for failing to do so. Those
without access to affordable coverage through an employer would be eligible to
apply for federal subsidies and shop for coverage in the new state-based exchanges,
starting in 2014."
Here's what we found interesting. As we perused the article on "reform" in preparation
for the above summary, we noticed that the advertising on the page was targeted
at physicians, offering jobs by a Locum Tenens company for emergency room and
family practice physicians. This is the first time we've ever seen this as most
of these ads are in trade journals and medical related web sites. We expect to
see more of this as more and more physicians leave the practice of medicine.
California mulls taxing marijuana to improve fiscal status. You be the
judge on this one. According to Reuters: "With California teetering perpetually
on the edge of financial ruin, marijuana activists have seized the moment, claiming
that legalizing and taxing pot could help bail out the cash-strapped Golden State." The
question is whether a stoned public would work enough to actually generate any
other taxes. And yes, there is public support for legalizing THC. According to
Reuters: "A Field Poll in April found 56 percent of California voters favor legalizing
recreational marijuana and taxing it as a new revenue source to ease the budget
crunch. The state tax board found that California could collect $1.4 billion
a year in taxes from a legalization bill proposed by Assemblyman Tom Ammiano,
a San Francisco Democrat." Party on dudes.
In one fell swoop, the government will take care of all our problems. It won't
matter that there won't be any doctors to take care of us, because we can move
to California and be numb all the time as the government pays for our medical
marijuana and our Medicaid. What a great year this has been for traditional American
values.
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Three Issues To Consider As The Year Winds Down
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Iraq, The U.S. Culture Wars, And Higher Taxes Ahead
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As the year winds down it's always good to have your feet on
the ground. But this time around, if you reach for the stars you could risk
taking a major body blow, which means that staying close to the ground, digging
in and being careful may be the best new year's resolutions for investors and
other every day folk.
The Next Phase In Iraq
The news cycle barely glossed over this story, but the apparent occupation of
an oil well in Southern Iraq, by a group of invaders is quite significant. The
most commonly blamed perpetrator was Iran, although, confirmation of who was
involved is scarce. Yet, it seems to have happened, and it has huge potential
implications for the markets and for the world at large.
According to Stratfor.com: "the Iranian intent behind this operation is becoming
clear." According to the intelligence web site: "STRATFOR has received multiple
reports from well-placed and high-ranking Iranian sources in the last 24 hours
that have indicated that the Iranian incursion into southern Iraq was a deliberate
warning to the United States ahead of the upcoming P-5+1 (the five permanent
members of the U.N. Security Council plus Germany) conference call very tentatively
slated for Dec. 22. Iran is well-aware that the United States has set a deadline
for the end of December for Iran to negotiate or else face coercive action, beginning
with an escalation in the U.S.-led sanctions regime against Iran’s gasoline trade.
Iran has responded as expected to the pressure by throwing out various proposals
to buy time, including one to move its nuclear fuel to Kish Island in the Persian
Gulf and a noncommittal statement by Iranian President Mahmoud Ahmadinejad suggesting
that Iran could negotiate a deal to ship 1,200 kilograms (about 2,600 pounds)
of its enriched uranium abroad for further enrichment."
Stratfor suggests that once the December deadline passes, if there is no agreement,
Israel may make its long awaited military move. Stratfor thinks that the Iranian
invasion of Iraq is a clear message of how it will respond to any kind of incursion
into its territory.
Stratfor adds that Iran is also not happy with the political moves being made
by Iraq's Prime Minister. According to the report: "Iranian STRATFOR sources
have said that Iran is displeased with Iraqi Prime Minister Nouri al-Maliki’s
move to form an independent political coalition, known as the State of Law, to
contest the March 2010 parliamentary elections, as opposed to joining the Iranian-backed
Iraqi National Alliance (INA) led by the Islamic Supreme Council of Iraq (ISCI).
This supports another report from a high-ranking Iranian official who also claimed
that Iran wished to test al-Maliki’s loyalty ahead of the elections."
So here's what's at stake. As health care "reform" and "global warming" are keeping
President Obama busy, Iran is moving into Iraq and looking to take the country's
political machine over. According to Stratfor: "It appears that Iran is strong-arming
al-Maliki and his political allies into rejecting U.S. backing and falling within
Tehran’s political orbit. As STRATFOR indicated in early October, the United
States is lagging behind Iran in shaping the political battlefield in Iraq. The
line in the sand has now been drawn, and pressure is piling on al-Maliki to define
his political loyalties. If he gives in to Iranian pressure, Iran will have succeeded
in showcasing its upper hand in Iraq."
Culture Wars Unfold In U.S.
O.K., this is a touchy subject, and we're wading into it with trepidation. Nevertheless,
it's there, and it could have significant meaning, politically and financially.
So here goes.
We ran accross Peggy Noonan's latest missive, titled "The Adam Lambert Problem." To
summarize, Ms. Noonan thinks that Mr. Lambert's display of what some folks find
distasteful, but he doesn't, is a problem, because Mr. Lambert's risque' act
was shown on the major networks, in prime time, when traditional families including
children were watching. Ms. Noonan notes that while cable is something you pay
for, and thus caters to your own particular tastes, "the big broadcast networks
are for everyone. They are free, they are available on every television set in
the nation, and we watch them with our children. The whole family's watching.
Higher, stricter standards must maintain." Yet, the networks failed their constituents
by allowing Mr. Lambert's risque' act to air unedited.
So without getting much further into the controversy, Noonan makes some valid
points. She notes that "creepy" (her words) musical acts, in and of themself
don't "matter much" in the greater scheme of things. But she does point to a
rising sentiment in those who still adhere to traditional values in the U.S.
And that is that "increasingly people feel at the mercy of the Adam Lamberts,
who of course view themselves, when criticized, as victims of prudery and closed-mindedness." Noonan
adds the following key statement: "America is not prudish or closed-minded, it
is exhausted. It cannot be exaggerated, how much Americans feel besieged by the
culture of their own country, and to what lengths they have to go to protect
their children from it," which leads to the key of this whole commentary: "It's
things like this, every bit as much as taxes and spending, that leave people
feeling jarred and dismayed, and worried about the future of their country."
This is not new. In The
Death of Right and Wrong: Exposing the Left's Assault on Our Culture and Values Tammy Bruce, a lesbian conservative talk show host, highlighted
how the government of the U.S., via the recently controversial National Endowment
of the Arts, often funds controversial programs in American Universities that
often feature frank, explicit, and unconventional sexual acts that make Mr. Lambert's
recent display look tame. Meanwhile, our public education system is in shambles.
Other books such as David Horowitz's One-Party
Classroom: How Radical Professors at America's Top Colleges Indoctrinate Students
and Undermine Our Democracy offer even more grizzly details about the state of our tax
funded educational system and its steady deterioration into an inductrination
program for non-traditiona values and politics in the U.S.
No, this isn't an Ann Coulter rant. This is a commentary into key factors that
are about to affect the reader's money and the overall investment climate.
And as always, our intent is to alert our readers about significant issues that
will affect their investments and their pocketbooks.
Conclusion
Taxes are about to rise. Access to health care is about to change. Television
networks are pushing the envelope toward more risque' material as they search
for ratings. And traditional values are being replaced by something else, while
those who adhere to them are financing the change.
The conflicts in Iraq and Afghanistan are about to take significant turns, especially
if Israel attacks Iran's nuclear installations.
The U.S. is in no fiscal position to withstand too many outlandish items on the
president's political agenda. And it is possible that if the global military
landscape changes, countries will turn inward and eventually stop financing U.S.
deficits.
That's what this commentary is about, the financing of "change" which a small
majority voted for, and which polls show, that same group of folks is now regretting.
All of these factors are likely to come to a head over the next few months. And
when they do, the financial markets will respond. Most likely the response will
be violent.
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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Watching Health Care ETF (NYSE: XLV) For Reaction
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The SPDR Health
Care ETF (NYSE: XLV) is ripe for some kind of move in reaction
to the passage of the Senate health care bill.
Chart Courtesy of StockCharts.com
Low volume and thin end of the year crowds may or may not
react to the passage of health care legislation. And a
lot remains to be worked out before the whole thing gets
signed into law. But one thing seems certain. This will
be landmark legislation.
From a market standpoint, the insurance companies came out o.k. as they will
still be running the system. And drug companies have already raised prices, some
9%, in preparation for the eventual passage of the bill.
That leaves hospitals, medical equipment and materials companies, and biotech
as the potential bag holders, not to mention physicians, health professionals
at all levels, and patients.
There, the potential is mixed as some of the taxes and reimbursement cuts will
be aimed at these branches of the sector. The insurers will likely remain profitable
due to the increased numbers of patients that they will insure.
But the reimbursement cuts, and the hidden taxes, fees, and increased regulation
will likely cut into profits, and even into revenues and perhaps sales of equipment
companies. Hospitals are hard to predict at this point, given the fact that these
institutions often find money somewhere, and since Medicaid will be increased
by this bill, it could benefit hospitals, or at least keep things close to where
they are on a bottom line basis.
The sector has had a fairly good advance of late, especially the large cap drug
companies and the health insurers. But that was based on the assumption that
there would not be a significant bill passed. That means that it's now about
how the market interprets what has just happened.
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Technical
Look at the Market |
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S & P Hugs 1100 - SPY ETF Remains at 4-stars
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The S & P
500 fell below 1100 on 12-17 but squeezed back above
the key chart point on 12-18. It also closed just above
its 20-day moving average after closing just below it
the prior day.
It's hard to predict what's next, given so many crosscurrents in the market.
The key is whether traders want to take prices higher before the Christmas holidays
or if they will walk away for the year leaving little but thin trading influenced
volatility behind.
So the technical aspects of the market are increasingly important, and that's
why the shrinking volatility bands are very important to keep an eye on.
The bottom line is that it pays to be careful.
Summary of Start Rating System
We are adapting our star based rating system to the S & P SPDR ETF (NYSE:
SPY). In this section a 5-star rating for SPY is a signal that down side risk
is very low and that the chances of a further rise in prices are greater than
those of a fall. A 4-star rating Means that the risk is less attractive but that
the odds of a rise in SPY still outweigh the risks of a fall.
A 3-stars rating on SPY suggests that the odds of a rise and a fall are even.
2-stars and 1-stars suggest that down side risk is on the rise.
In no way is this star rating system intended as a series of buy and sell recommendations.
The system is intended as a guide to the general trend of the market and the
S & P SPDR ETF.
Star ratings can change rapidly based on the market's action. Followers of the
ratings should review them on a daily basis.
Star Ratings for S & P SPDR ETF (NYSE: SPY) - updated 12-16-09
S & P SPDR ETF (NYSE: SPY), 4 stars on 12-1-09 - closing price 110.84. Closing
price on 12-18-09 110.21. Short term support is at 109.57. Resistance is at 111.74
and is being tested. A sustained move move above 111.74 would raise the rating
to 5-stars. A move below 109 would drop the rating to 3-stars.
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
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