U.S. stock index futures are pointing to a higher opening
on Tuesday. That would make it seven days in a row of higher prices if
things close on a positive note. That means that some kind of consolidation
is likely within the next week.
Today's Economic Calendar:
- ICSC-Goldman Store Sales 7:45 AM ET
- Redbook 8:55 AM ET
- S &P Case-Shiller HPI 9:00 AM ET
- Consumer Confidence 10:00 AM ET
- State Street Investor Confidence Index 10:00 AM ET
- 4-Week Bill Auction 11:30 AM ET
- 5-Yr Note Auction 1:00 PM ET
News For Thought
Washington Post wails on Obama terrorist response. The Washington Post
took the Obama administration to task. In an editorial, the Post notes: "THE
THWARTED Christmas Day airplane bombing raises three causes for alarm. First,
it illustrates a screening system that remains porous enough to let a suspect
board with the same explosive shoe-bomber Richard Reid attempted to use in 2001.
Second, it exposes a terrorism bureaucracy too clumsy to catapult the suspect,
Umar Farouk Abdulmutallab, at least to a higher level of preflight scrutiny after
his father came forward with warnings that he might pose a danger. Third, if
it is true that the suspect received explosives training from al-Qaeda in Yemen,
the incident underscores the emergence of that troubled nation as a training
ground for terrorists. To that initial list, we would add a fourth: the disturbingly
defensive reaction of the Obama administration."
The post added: "More disturbing is the apparent failure of U.S. authorities
to respond swiftly and seriously to warnings by Mr. Abdulmutallab's father about
his son's "radicalization and associations" with Islamist extremists." What the
Post doesn't say is that this incident in many ways echoes the early days of
the Bush administration where then National Security Advisor Condoleeza Rice,
according to Richard Clarke, failed to address his concerns about the rising
levels of intelligence that suggested that something big was moving toward the
United States.
It seems as if Mr. Obama's answer to Ms. Rice's alleged blunder lies with his
Homeland Security chief Janet Napolitano. As the Post points out, and all reporting
points to, Ms. Napolitano blew it. Noted the Post: "it is hardly reassuring to
argue, as Homeland Security Secretary Janet Napolitano did on ABC's "This Week," that "once
the incident occurred, the system worked." The attack was averted because of
the luck of a faulty detonator and the quick response of alert passengers."
Americans expect another successful terrorist attack. Former Vice-President
Cheney got a lot of grief for noting that more terrorist attacks against America
were possible during the Obama administration. It seems as if he's not alone.
According to Rasmussen Reports.com: "A new Rasmussen Reports national telephone
survey finds that 79% of U.S. voters now think it is likely there will be another
terrorist attack in the United States in the next year. That’s a 30-point jump
from the end of August when just 49% of Americans felt that way. The current
level of concern is even higher than it was in the summer of 2007 when 70% considered
an attack likely. In December 2008, 58% said an attack was likely."
A significant number, 42% of those polled "say another terrorist attack in America
is very likely within the next year."
According to Rasmussen: "Republicans are more worried about another terrorist
attack in the near future than are Democrats and voters not affiliated with either
party. The Political Class is much less fearful than Mainstream voters."
Finally, Rasmussen reports: "Homeland Security Secretary Janet Napolitano has
been criticized for her response since the Christmas Day terrorist attempt. Forty-five
percent (45%) of voters had an unfavorable opinion of Napolitano in April, while
30% viewed her favorably."
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The news coverage is all over the Middle East as a potential
powder keg. Yet, Russia presents its own set of issues to be reckoned with.
After the 9/11 disaster, Russia's then president, Vladimir Putin was the first
global leader to extend his hand in friendship and support to the Bush administration.
At that time events seemed to finally have delivered, albeint in a perverse
manner, enough common ground for Russia and the U.S. to finally find a way
to cooperate and perhaps even coordinate foreign policy in a climate of unprecedented
harmony.
Yeah, right. After about twelve months it became clear that it was going to be
business as usual, as the potential for coordination in energy policy, ie. U.S.
technology coupled with Russian resources fizzled. In fact, Russia used the opportunity
given to them by the U.S. having to put its attention elsewhere, to back out
of several deals with Exxon Mobil and Chevron Texaco. Putin and his allies then
incarcerated Mikhail Khodorkovsky, the leading oligarch at the time, and began
to consolidate power internally. Soon thereafter, the Kremlin begin to project
its power into its old strongholds of Eastern Europe and began to court Iran,
Venezuela, and other former allies.
Now, Russia is in a position to influence global policy with regard to Iran,
since it's the architect of Iran's nuclear plants, and it has its hands everywhere,
especially South America, where it has become a major supplier of weapons, including
airplanes to Venezuela, where it has plans to actually make weapons in factories
that it will run as joint ventures with Hugo Chavez.
Yet, it's not all full speed ahead for Russia, as Mr. Putin faces a significant
internal struggle which will influence which way things shake out, or more likely,
when Russia can move full speed ahead into what it plans to do over the next
decade, return to being a Super Power.
The major external detractor has been the economy. Russia got hit fairly hard
in the global economic crash, but has recovered enough to continue its path toward
recovery based on the rebound in commodity prices. The fact that Russia had to
spend about a fifth of its foreign reserves in order to keep the country afloat
during the post crash period has led to a major internal power struggle as different
factions try to increase their influence. The choices are simple, return to the
old central planned economy or move toward a more market driven model. So far,
it's been a bit of both, with lots of pushing and shoving between the ruling
clans inside the Kremlin.
According to Reuters: "Russia has a few pluses. Its financial system is less
indebted than that of more developed peers. Strong neighboring Asian economies
are big markets. And the latest crisis has spurred some reforms, including a
revival of the moribund privatization program and a re-energized a bid to join
the World Trade Organization. A new nuclear weapons treaty with the United States
will be welcomed around the world." Yet, that's a big and broad set of issues
condensed into a paragraph. Because of the centuries old intrigue inside the
Kremlin, nothing will be simple. And it's that helter-skelter potential that
will, as usual, drive Russia's foreign policy, and create problems for the barely
sentient Obamaites.
There are two major groups involved. The siloviki (Putin's gang) and the civiliki
(Medvedev's gang). The former are more interested in a centrally planned, old
style economy, while the latter, are more interested in some sort of more modern,
balanced economy that includes more conventional international trade as part
of the model.
And yes, it's all very much Russian style and contradictory. According to Stratfor.com: "The
civiliki’s plan has one main goal in mind: to implement real structural reform
in Russia’s major economic sectors. This will improve competition, attract investment
and purge waste and mismanagement. The plan has three parts — purge the non-business-minded
siloviki from positions of economic responsibility, introduce new pro-investment
laws and partially liberalize the economy. It is an incredibly ambitious plan
that would reverse laws designed by the FSB and Putin over the past six years.
But the reforms are being spearheaded by the one man Putin trusts on all finance
and economic issues: the civiliki’s Kudrin."
Yes, you read it right. Putin actually trusts the opposition's leading thinker/strategist/get
things done guy to remake the Russian economy.
What's our point? While Russia tries to remake itself, it will also have its
fingers into everything global, leading to its usual foreign policy, obstruction,
delaying, and catering to anybody at leasrt temporarily in order to buy time,
and position itself favorably.
Conclusion
Russia is the wildcard in 2010, much more than it has been for some time. As
it struggles to fix its internal problems, it will also be projecting its power
internationally.
And it's the international projection that is worrisome. Russia's military presence
in the Caribbean, via Cuba, and in Latin America, via Venezuela, should be troubling
to the U.S. Even if it's not an outright threat, it's going to be an annoyance.
The Russians know how to meddle, even if just enough to delay decisions by the
U.S. Meanwhile, Russia is playing an integral part in Iran's nuclear ambitions.
And as it moves into Venezuela, the U.S. has to factor in Russia as an aid to
Chavez' nuclear ambitions.
The fact that Russia's internal political struggle could get messy over the next
few years, should not give the impression that they are not a factor in global
foreign policy, especially when the U.S. has lost a significant amount of influence
over the last eight years, and has failed to regain it over the last twelve months.
In our opinion, while Iran, Iraq, Israel, and the Middle East will continue to
be central, Russia will be the proverbial fly in the ointment for 2010. And if
the fly decides to deliver a sting now and then, it could be enough to lead the
U.S. to bad decisions elsewhere.
Want a perfect example? The U.S. has yet to sign a major oil deal in Iraq. Yet,
as Stratfor.com reported this morning: "Russia’s Lukoil and Norway’s Statoil
ASA signed on Dec. 29 a 20-year deal to develop the 12.88 billion-barrel West
Qurna Phase 2 oil field in Iraq, AP reported. To be ratified Dec. 31 by the Iraqi
Cabinet, 1.8 million barrels per day will be produced in 13 years, with $1.15
per barrel of crude to be paid out."
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Procter & Gample
(NYSE: PG) and 3-M (NYSE: MMM), both big multinationals
are not exactly moving in the same direction raising questions
about the global economy, the jobs front, and the U.S.
dollar.
Chart Courtesy of StockCharts.com
3-M made a new high on 12-28, while P & G has been
struggling of late. That's significant since both are big
multinational companies who tend to rally with a weak dollar.
The new high in 3-M is most interesting, as it suggests that investors are betting
on an industrial recovery that seems to be strong enough to withstand a stronger
dollar.
For P & G, though, the news is not as good. If the market is willing to bet
on more construction and technology but not as much on toothpaste and soap, it
suggests that the market is betting against the consumer.
And that has broad implications. For one thing, consumers need jobs. And if those,
especially in the U.S. aren't likely to find steady work, it could affect their
purchasing patterns.
That sets up a scenario where contruction and expansion of the Chinese economy
could boost 3-M more than P & G. To be sure, P & G may have found support
at its 50-day moving average. And if it can rally from here, it may be a sign
that the dollar rally could be close to ending.
That means that the action in the big multinationals is worth watching very carefully.
Something to think about as the new year approaches.
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Technical
Look at the Market |
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S & P Breaks Adds To Breakout 1100 - SPY ETF Rises to 5-stars
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The S & P
500 moved slightly hither on 12-28 closed Christmas week
above 1125, well above the 1100 pivot point. The breakout
came on holiday volume and is certain to be tested within
the next few days or weeks.
Still, it happened, and it may some technical significance, since the overall
market seems to have a decent feel to it.
Investors still have plenty to worry about, especially the rising tensions in
the Middle East, as Iran, Iraq, and Israel are now entwined in a very complex
dance.
The bottom line is that it pays to be careful, yet, if something is working,
it's worth keeping.
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)
S & P SPDR ETF (NYSE: SPY), 4 stars on 12-1-09 - closing price 110.84. Closing
price on 12-21-09 111.33. 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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