Dallas, TX
January 28, 2010, 08:00 EST		 Dr. Joe Duarte's Market I.Q.


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Davos: Opinions Of The Rich And Famous
What's Hot Today:
U.S. stock index futures were pointing to a slighlty higher opening on Thursday. Asian and European markets bounced back overnight. U.S. stock index futures were much higher during and after Mr. Obama's speech, but gave up lots of ground overnight. The dollar was mixed while U.S. Treasury bonds crept higher.
Today's Economic Calendar:
  • Durable Goods Orders 8:30 AM ET

  • Jobless Claims 8:30 AM ET

  • EIA Natural Gas Report 10:30 AM ET

  • 3-Month Bill Announcement 11:00 AM ET

  • 6-Month Bill Announcement 11:00 AM ET

  • 7-Yr Note Auction 1:00 PM ET

  • Fed Balance Sheet 4:30 PM ET

  • Money Supply 4:30 PM ET
News For Thought

Public figures it out, why can't the government? According to Rasmussen.com: "Voters strongly believe that cutting taxes is a better job creation tool than increasing government spending. However, they overwhelmingly believe that Congress and the President will increase government spending rather than cut taxes."

Poll: Drop health care. According to Rasmussen.com: "Sixty-one percent (61%) of U.S. voters say Congress should drop health care reform and focus on more immediate ways to improve the economy and create jobs. A new Rasmussen Reports national telephone survey finds that just 30% of voters nationwide disagree and think Congress should press ahead with health care." Rasmussen added: "Senate Majority Leader Harry Reid was apparently one of those who viewed health care as important in Republican Scott Brown’s upset Senate win in Massachusetts. Reid suggested on Wednesday that Congress shift its attention to the economy and job creation, but House Speaker Nancy Pelosi countered that health care should still come first."

Finally: "Sixty-one percent (61%) of Democrats say the Obama administration should keep pushing health care reform. Eighty-four percent (84%) of GOP voters and 63% of unaffiliateds think the White House should wait until the economy gets better."

The ugly side of the Golden Arches? According to The Wall Street Journal: "The German subsidiary of McDonald's is embroiled in a dispute with a group of franchise holders who accuse the world's largest hamburger chain of using aggressive methods to try to force them out of their contracts."

Tax hikes: Oregon style. According to The Wall Street Journal: "Oregon voters approved two special tax measures Tuesday designed to close a $733 million state budget gap. With 91% of the vote counted, Measure 66 garnered 54% of ballots and Measure 67 received 53%, the Associated Press reported. Elections here are by mailed ballot only. Tuesday was the last day ballots could be cast. Measure 66 increases Oregon's personal-income-tax rate by two percentage points for households earning over $250,000 a year. Measure 67 calls for an increase in the state's minimum corporate income tax, currently $10 a year, and imposes a tax on gross revenues for corporations that don't report a profit. "

O.K. what did we think of the State of the Union Address? It was pretty much as we expected, full of all kinds of gimmicks and tricks. The stock index futures rallied during the speech, but it was hard to tell whether they rallied because of expectations of continued gridlock, or because they actually think that the speech made good points.

Traders are more cynical than even this scribe, so you fill in the blanks. If you have any comments about the speech or about the future, send them to us. We'll make you a star by working you into the column.

Davos: Opinions Of The Rich And Famous
Conspiracy Theorists Are In Hog Heaven With The Beltway Follies
Maria Bartiromo has been channeling Sophia Loren quite well in her broadcasts from Davos. Dig those shades Ms. B. But the content and context of what's actually bein said there is kind of interesting and worth parsing, at least a little. Indeed Davos is like an off Broadway offshoot of the Beltway Follies, as Washington's political spectacle has hit a new set of lows.

We have a friend who is as good a conspiracy theorist as there is on this planet. He thinks that George Soros financed the Obama campaign under cover so that Obama would get into office and lead us to this point in the political and market cycle so that he (Soros) could then short everything and make yet another fortune.

So it was with interest that we saw the Drudge headline that said that Soros had gone against Obama in Davos. We hightailed it to Reuters and found a defective story layout with no words beyond the first sentence. Maybe it was our browser. Or maybe it was just another conspiracy theory gone mad.

We snooped around all night (yup, we skipped most of the speech) and found what Soros actually said. According to The Wall Street Journal: "Financier George Soros said he backed Mr. Obama's plan to curb the activities of big banks, though he said it was both insufficiently broad and "premature," coming before banks had the chance to earn themselves out of their problems. "This development came too soon because the banks are not out of the woods," said Mr. Soros, chairman of Soros Fund Management LLC and founder of The Open Society Institute. He said he largely backs the administration's plan. "I'm very supportive of it but I don't think it goes far enough," said Mr. Soros, predicting the plan to stop commercial banks from speculating for their own accounts would lead big banks to split up and spin off investment arms, which themselves would become "too big to fail." Who knows what he really said. He's supportive but he wants more. O.K. so Drudge got a little creative on the headline. What else is new?

Something else that caught our roving eye was the talk of Ariel Roubini sounding upbeat. What the heck? That's like Darth Vader smiling or something. According to The Journal: "Mr. Roubini was uncharacteristically optimistic about the growth prospects for the world's emerging economies. But even there he found nits to pick in the form of China's risk of bubbles, Russia's aging population and political obstacles to structural overhauls in Brazil and India. Turning to bank regulation, Mr. Roubini was among those who argued for even more stringent measures that would separate commercial banking from investment banking."

The take home message, though, is a downer, as the emerging concensus is for a double dip sometime this year, coupled with expectations of a struggling global economy for several years. Contrarians can take some heart in this, as these are the same guys that thought that the party could last forever in 2007.

What's Up With The White House And The Supreme Court?

Our conspiracy theorist friend was busy e-mailing us last night. He sent us a clip from Politico.com (http://www.politico.com/blogs/politicolive/0110/Justice_Alitos_You_lie_moment.html), that was interesting. Here's the jist of it. Mr. Obama dissed the recent Supreme Court decision with regard to campaign finance law. Judge Alito openly disagreed. Watch the clip.

So here's what our friend pointed out. The White House isn't getting along with Congress. That's not new. But now, the White House isn't apparently being civil to the Supreme Court. That's a very interesting set of dynamics. Our conspiracy theory friend thinks that there's more trouble ahead on that front, and that it could mean some very bad consequences down the line.

Sneaking Obamacare Through Congress?

This one keeps us in conspiracy theory mode. According to conservative columnist Dick Morris: "Highly informed sources on Capitol Hill have revealed to me details of the Democratic plan to sneak Obamacare through Congress, despite collapsing public approval for healthcare "reform" and disintegrating congressional support in the wake of Republican Scott Brown's victory in Massachusetts." Morris writes: "President Obama, House Speaker Nancy Pelosi, and Senate Majority Leader Harry Reid all have agreed to the basic framework of the plan. Their plan is clever but can be stopped if opponents of radical healthcare reform act quickly and focus on a core group of 23 Democratic Congressman. If just a few of these 23 Democrats are "flipped" and decide to oppose the bill, the whole Obama-Pelosi-Reid stratagem falls apart."

How are they going to do it? According to Morris: "First, the House will pass the Senate's Obamacare bill that passed the Senate in December. The House leadership will vote on the Senate bill, and Pelosi will allow no amendments or modifications to the Senate bill." Second "Behind closed doors, Reid and Pelosi have agreed in principle that changes to the Senate bill will be made to satisfy liberal House members — but only after the Senate bill is passed and signed into law by Obama. This deal will be secured by a pledge from Reid and the Senate's Democratic caucus that they will make "fixes" to the Senate bill after it becomes law with Obama's John Hancock."

Finally: "According to my source, Reid will provide to Pelosi a letter signed by 52 Democratic senators indicating they will pass the major changes, or "fixes," the House Democrats are demanding. Again, these fixes will be approved by the Senate only after Obama signs the Senate bill into law. Reid also has agreed to bypass Senate cloture and filibuster rules and claim that these modifications fall under "reconciliation" and don't require 60 Senate votes. To pass the fixes, he won't need one Republican; he won't even need Joe Lieberman or wavering Democrats such as Jim Webb of Virginia. His 52 pledged senators give him a simple majority to pass any changes they want, which will later be rubberstamped by Pelosi's House and signed by Obama."

Conclusion

Quite a few things to consider this morning. First, the mood in Davos is glum. That's interesting given that most of the people that go to Davos have no worries. Think about that for a while.

Second, what in the world is going on in Washington? Presidents don't usually go toe to toe with the Supreme Court in prime time. And justices don't openly argue with the president. That's some big time strain up there inside that beltway folks.

Then there's the reported sneak attack on health care. Dick Morris is a well connected guy who's come up with his own significant sneaks in his time.

What's the take home message? It's clear that the political infighting and haggling has just begun. The White House is trying to reposition itself in order to win something and the rest of the government has seen some blood in the water and in true sharklike fashion are moving in to see what they can get out of it.

Unfortunately, the rest of us are now caught in the middle and the global economy is being held hostage as a result of crazy politics and policies. This remains a treacherous set of markets.

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.

 

Market Moves - Stock Of The Day
S & P 500 SPDR ETF (NYSE: SPY) Is Trying To Turn Back Up

The S & P 500 SPDR ETF (NYSE: SPY) looks to be trying to rally.



Chart Courtesy of StockCharts.com



Boy are we bearish. And boy does that SPY ETF look as if it's setting up for a rally.

No, we're not talking out of both sides of our mouth. We are bearish, and the market does look poised to bounce. Look at the technicals.

SPY fell to the 109 area in a big way last week. But it didn't fall any further and it bounced back yesterday as the Federal Reserve's statement was less bearish than recent such statements.

Volume rose yesterday as the market rallied. The market is oversold based on the usual gaggle of oscillators, especially RSI. And the sentiment is as dark as we've seen in some time.

The big earnings are almost done, and they've actually been pretty good, all things considered. Revenues have improved some, and folks just aren't complaining as much.

How does this all add up? Rising bearish sentiment coupled with a bottom in the charts is worth considering as a potential trading opportunity on the long side.

Does that mean you make big bets and think that any rally is fool proof? No. But situations such as the current one are worth exploring. There is resistance overhead at 1110-1120 on the S & P 500. But if the market can blast above that resistance band it could move back to 1150.

In a market such as this one you have to have your eyes open and trade the charts.
 

 


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