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Dallas, TX
January 20, 2010, 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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Brown Wins But Nothing Is Certain
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What's Hot Today: |
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U.S. stock index futures are pointing to a lower opening
on Wednesday. Global markets were mostly lower.
Today's Economic Calendar:
- MBA Purchase Applications 7:00 AM ET
- ICSC-Goldman Store Sales 7:45 AM ET
- Housing Starts 8:30 AM ET
- Producer Price Index 8:30 AM ET
- Redbook 8:55 AM ET
- 4-Week Bill Auction 11:30 AM ET
News For Thought
Saudi front against Yemen is more significant than being reported. According
to The Wall Street Journal: "As Yemen ratchets up a military offensive against
al Qaeda, Saudi Arabia is pressing a surprisingly costly battle of its own against
rebels along Yemen’s northern border. Prince Khaled bin Sultan, the kingdom’s
assistant minister of defense and aviation, said 82 Saudi soldiers had died in
the fighting as of last week, with another 470 injured and 21 missing. The death
toll took many analysts by surprise."
New Taliban commanders are excellent strategists and tacticians. The rise
of a more aggressive and savvy Taliban is the latest worry in Afghanistan. Among
the new leaders is Sirajuddin Haqqani, whose increasing use of suicide bombers
and precise guerilla tactics is creating a problem for the U.S. "surge" strategy.
It's believed that Mr. Haqqani was responsible for the attacks in Kabul that
took place earlier this week.
Yemen: Air strikes hit Al-Qaeda leader's home. According to AFP: "Yemeni
jets pounded the home of a suspected Al-Qaeda leader Wednesday, a military source
said, as the army stepped up pressure on the group believed behind a botched
bid to down a US airliner. A tribal source confirmed the air strikes in Erq Al-Shabwan
village, in Maarib province, and said a number of people had been killed. Local
forces were responding with anti-aircraft fire. The wave of air strikes, which
began in the morning, blasted the house of Ayed al-Shabwani, one of six Al-Qaeda
leaders the government said were killed in an air strike last week, the tribal
source said."
Notice something this morning? As the Brown win in Massachussetts hogs the news,
other things with potential bearing to the U.S. are happening. And many of them
are in the Middle East. Yemen is the hottest hot spot at the moment. It's uncertain
as to what's going to happen there, but it's important because that's where all
the new international militants seem to be coming from.
Yeah, while the U.S. was finally succeeding to some degree in Iraq, Al-Qaeda's
latest franchise was growing in Yemen and getting ready to export airplane suicide
bombers. Here's what's emerging. The Taliban are becoming formidable in Afghanistan.
They are now able to attack anything there at will, surge or no surge by the
U.S.
Iran will be a full fledged nuclear power at some point in the future. When is
not as important as if. When Iran becomes nuclear, you can bet Venezuela will
want in on the action. That will put a bad guy with access to nukes in our hemisphere,
and with partners that want to hurt America. Yeah, you're starting to see it.
While the U.S. government fiddles with politics and "health care reform" all
kinds of folks are furthering their own and coalesscing agenda.
The bottom line? The U.S. has taken its eye off the ball and there is little
evidence to suggest that anyone on the political end of things really sees the
very big picture.
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Brown Wins But Nothing Is Certain
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Betting On Gridlock Is As Uncertain As It Is Attractive
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Scott Brown won Ted Kennedy's senate spot on Tuesday, a
development that will have some significant repercussions. The problem is that
no one knows what those repercussions are, which is why the stock market may
not follow through on Tuesday's gains.
Mr. Brown clearly capitalized on the public's mood while his tone deaf candidate
Martha Coakley, much like her party's leadership was stunned that the public
would actually vote against her. And that's the problem with betting on gridlock
at this stage of the game, the Democrats aren't certain to roll over and have
a Clinton epiphany. Anywone who watched any of the ongoing post mortem analysis
saw that people like Howard Dean and Fox's Juan Williams suggested that president
Obama and the Democrat leaders were likely to "double down" as Williams said,
and to get tougher on this issue as Dean told MSNBC.
While it's not certain that Mr. Dean or Mr. Williams are correct about what president
Obama and his congressional leaders will do, their take on things is a sign that
there are some in the party that are still willing to fight for the health care
bill. So the question now is more about whether the Democrat party can even stick
together on their key issues and what may happen to the government.
In other words, if this was England or Germany, there might be calls for early
elections. But since this is America, other things may happen, and few of them
are likely to be pleasant.
For one thing, it's going to be nearly impossible now to get the Bush tax cuts
to be extended. That means that higher taxes are now almost an undeniable certainty.
And for another, if there were any worthwhile measures to be implemented in the
stimulus package, they are likely to slow. Next, any kind of Medicare fixes,
such as freezing doctor reimubursements at current levels are up in the air,
and the 20% pay cut that has been postponed, may actually go into effect.
For retirees all kinds of issues are also up in the air, such as what will happen
to their Medicare advantage plans. There is likely to be some fallout in the
AARP's leadership.
The U.S. has two active war fronts in the Middle East, Afghanistan and Iraq.
Questions about what will happen there and Mr. Obama's ability to strongarm the
leaders of those countries with regard to foreign policy are now increasingly
significant. The same goes for issues in America, such as Venezuela's rapid moves
toward open totalitarianism and the aggressive drug war in Mexico.
All that being said, as investors we should be looking for what's working in
this climate. And the early returns suggest that the U.S. dollar will benefit
from the current changes. There are plenty of reasons, with the major one being
that if the health care bill fails, as it now may, the U.S. taxpayers won't be
on the hook for another trillion dollar program from the Obama administration.
One way to own the dollar is by using the U.S. Dollar Bull ETF (NYSE: UUP). Dr.
Duarte owns shares in UUP. This is the ETF that buys the U.S. dollar index, is
featured in our currency section, and has been forming a base lately.
Chart Courtesy of StockCharts.com
A move above 23 in this ETF would suggest that the trend for the U.S. dollar
may be starting to turn up.
Conclusion
Wall Street sees gridlock as a good thing. And they have a point, given the fact
that divided government usually leads to only the passage of laws that deal with
things that are absolutely necessary. As with the past two presidencies, it’s
clear that when Congress and the President are from the same party, things get
done, and lots of people don’t seem to like the things that get done, or nearly
done.
And some in the market are betting that this will be a similar situation to 1994,
where president Clinton moved well to the center and avoided a catastrophic turn
of events for the U.S. government, while ushering another five years of significant
stock market gains.
The problem is that this isn’t 1994. Barack Obama isn't Bill Clinton. Nancy Pelosi
and Harry Reid are unpredictable, and are really p.o'd about last night. Furthermore,
this crop of Republicans likes to spend as much as the Democrats.
Still, there's going to be a whole lot of fighting going on in the next few weeks,
so maybe that’s the key. If they’re all fighting amongst themselves and with
each other, those of us who actually work for a living may get a break. Even
if it’s just for a few months, it may be worthwhile.
No matter what, though, this is not a victory for those who want smaller more
responsible and frugal government. It's a start down that road. But even as a
start, it's not much of one, given that in 1994, the Republicans had the Contract
with America. This time around, they have nothing besides their general opposition
to anything that has to do with Obama.
That can only carry you so far. For investors, it means that the stock market
is still a risky place and that the dollar is becoming more attractive.
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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Ultrashort China ETF (NYSE: FXP) Set To Open Strong
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The Ultrashort
China ETF (NYSE: FXP) looked set to open up nearly 6% on
Wednesday, based on very early pre-market indications.
Chart Courtesy of StockCharts.com
It's hard to pen a column based on a security that will
trade an hour after we go to press. But since the Asian
markets dove overnight, this one might be worth looking
at.
Over the last few days, the Chinese stock market, along with other Asian bourses,
has been struggling. Tighter monetary policy in China is one reason. The U.S.
dollar is also starting to show some strength.
But mostly, there's a feeling in the air that China is the next bubble to pop.
Lots of commentary has been produced on that topic lately. And why not? China's
centrally planned economy has been a set up to crash for a long time, but hasn't.
That's because the government is clever and has deep pockets.
Yet, there is this thing going on with Google now, which is interesting, as it
may affect the fate of those companies in China that do real business with the
rest of the world.
There's clearly something in the air in Beijing, and on the Shanghai market.
Watch FXP carefully.
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