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Agendas Vs. Portfolios: Left, Right, Or Candlesticks? Oil: Above $55. Stocks: Can Stocks Rally Into September?
by Dr. Joe Duarte,
Dallas, TX, June 6, 2005 , 08:00 EST * excerpts from daily reports
Pre-Market Summary
Some calm is returning to the bond and currency markets after last week’s drubbing of the Euro. Markets stabilized after Friday’s low volume selling on Wall Street. Investors now face the dilemma of delivering a summer rally or going on a well deserved vacation.
Today’s Analysis: Left, Right, Or Candlesticks.
Conservative voices are hinting at charges of media manipulation and a wild eyed conspiracy from the left. Liberals are saying that the U.S. is exhibiting a pattern of prisoner abuse that resembles episodes of past infamy.
The situation has stemmed from the controversial report in Newsweek several weeks ago, amidst allegations and admissions of damage to the Koran in Guantanamo.
On The Left
The initial reaction from the U.S. government was of complete denial. But over the weekend, The Drudge Report highlighted a Reuters report whose lead line was: “The White House sought on Saturday to minimize damage from new revelations about U.S. personnel mishandling the Koran at the Guantanamo Bay, Cuba, prison, accusing a few people of violating policy and the media of blowing "isolated incidents" out of proportion.” In the report, there were references to urine and toilets being associated with the Koran: “The U.S. military on Friday released details about five cases in which the Islamic holy book was kicked, stepped on and soaked in water. In one case, a guard's urine splashed onto a detainee and his Koran. Southern Command said a guard urinated near an air vent and "the wind blew his urine through the vent" and onto a detainee and his Koran.”
Much has been made about remarks made by Amnesty International about Guantanamo being a gulag. But, according to Reuters, Amnesty International is now softening its public remarks, in a way reminiscent of the Newsweek debacle. “Despite highly publicized charges of U.S. mistreatment of prisoners at Guantanamo, the head of the Amnesty International USA said on Sunday the group doesn't ["know for sure"] that the military is running a ["gulag."]”
The political rhetoric is running hot and nasty. But, the facts, at least as being reported as more information becomes available, are painting a very different picture in some cases. For example, according to Reuters: Amnesty International’s Executive Director William Schulz said Amnesty “did not know whether Secretary Defense Secretary Donald Rumsfeld approved severe torture methods such as beatings and starvation.” But, in the same report, Reuters noted: “Schulz recently dubbed Rumsfeld an ["apparent high-level architect of torture"] in asserting he approved interrogation methods that violated international law. ["It would be fascinating to find out. I have no idea," Schulz told "Fox News Sunday."]
And then, there was the weekend talk show outrage being displayed by the Democrats: “A leading Democratic U.S. senator on Sunday repeated his call for a full investigation and said the detention center should be closed. ["The end result is, I think we should end up shutting it down, moving those prisoners. Those that we have reason to keep, keep. And those we don't, let go,"] Sen. Joseph Biden of Delware told ABC's ["This Week."]
On The Right
The spin on the right is equally hot and heavy, with subtle and not so subtle hints at subversion and other interesting activities.
According to Human Events On Line’s Michelle Malkin, “The mainstream media and international human rights organizations have relentlessly portrayed the Guantanamo Bay detention facility as a depraved torture chamber operated by sadistic American military officials defiling Islam at every turn.” Malkin then lets us in on some interesting allegations, and admits that there “been abuses,“ but then writes: “here is the rest of the story -- the story that the Islamists and their sympathizers don't want you to hear.
Malkin’s laundry list follows:
1) “According to recently released FBI documents, which are inaccurately heralded by civil liberties activists and military-bashers as irrefutable evidence of widespread ["atrocities"] at Gitmo: A significant number of detainees' complaints were either exaggerated or fabricated (no surprise given al Qaeda's explicit instructions to trainees to lie).
2) “One detainee who claimed to have been ["beaten, spit upon and treated worse than a dog"] could not provide a single detail pertaining to mistreatment by U.S. military personnel. Another detainee claimed that guards were physically abusive, but admitted he hadn't seen it.”
3) “Another detainee disputed one of the now-globally infamous claims that American guards had mistreated the Koran. The detainee said that riots resulted from claims that a guard dropped the Koran. In actuality, the detainee said, a detainee dropped the Koran then blamed a guard.”
4) “Other detainees who complained about abuse of the Koran admitted they had never personally witnessed any such abuse, but one said he had heard that non-Muslim soldiers touched the Koran when searching it for contraband.”
And 5) ‘In one case, Gitmo interrogators apologized to a detainee for interviewing him prior to the end of Ramadan.”
Malkin, then cites a negative book on Gitmo, co-written by Erik Saar, a sergeant who served there for six months, as providing “inadvertent” clues about the reality of the prison for Islamic inmates.
Energy Sector
Oil Market Summary And Outlook: Refinery Capacity At Fever Pitch
The panic button is being pushed on refinery capacity. Our readers have known about this becoming a problem for several months. Anyone who has read “Successful Energy Investing,” published in 2001, has seen this coming. And now, the markets have grasped the lack of U.S. refinery capacity in a world of rising demand, as the latest battle cry to take oil prices higher.
Our energy stock list is once again starting to grow. Click on the left navigation bar for all the details.
According to Bloomberg: “Crude oil climbed to a six-week high (overnight) reaching a record in euro terms amid concern that surging fuel demand is straining output from U.S. refineries, causing some to break down and halt processing. Hovensa LLC shut a unit at its St. Croix, U.S. Virgin Islands plant on June 3, the latest in a series of closures at U.S. refineries that are heightening concern there may not be enough gasoline to meet peak summer demand and heating oil before the northern hemisphere's winter.”
Refineries are operating at near full capacity, now, with little slack in the system, and rising risks of equipment break down situations due to the high rates of utilization. Bloomberg reported: “U.S. refineries operated at 96.2 percent of capacity in the week ended May 27, according to the Energy Department. Demand for distillate fuels, including diesel and heating oil, jumped 7.7 percent to 4.2 million barrels a day that week, up 4.2 percent from a year earlier. [``Fuel demand in the U.S. is still high from the private consumer and in Europe demand isn't substantially down,'' Laughlin said. ``Only a cold summer would take some steam off this market'' because of lower gasoline and air-conditioning use in the U.S. and Europe.”]
Last week’s supply data, according to Marketwatch : “The Energy Department said crude supplies rose 1.4 million barrels in the week ending May 27. Gasoline supplies rose 1.3 million barrels, while distillate supplies rose 700,000 barrels. Separate data from the API showed crude supplies up 1.3 million barrels, distillates up 783,000 barrels and gasoline down 1.4 million barrels. The Energy Department said that over the past four weeks, gasoline demand has averaged more than 9.3 million barrels a day, or 1.8% more than in the same period a year ago. Distillate fuel demand of almost 4.1 million barrels over the past month is 5.2% greater than the year-ago period. Demand for kerosene-type jet fuel has grown 5.5% compared with the year-ago, four-week period.”
The latest supply data will be out on Wednesday at 10:30 Eastern Time.
Bottom line: the energy markets are once again attractive.
Technical Summary:
Searching For Clues On Summer Rally
The traditional summer rally season runs from Memorial Day to Labor Day. That means that we are now in the mythical period for the current year. The market got a fairly good start on a summer rally last week, albeit with a few hiccups here and there, due to the situation in Europe, and the rising oil prices, as well as the ongoing controversy with regards to allegations of widespread prisoner abuse by the United States.
Technically, though, things don’t look too bad. Market breadth has been good. The number of stocks making new highs has expanded slightly. Some companies continue to merge with others. There is some activity in the IPO markets. And most important, the Fed has hinted that it might be considering and end, or at least a pause in its cycle toward higher interest rates.
Last week, we wrote: “If the market rallies into the close on Friday, and can gather itself next week, we might see an honest to goodness summer rally, instead of the usual dull trading over the summer months. “
Friday was a bummer. But, Monday is not showing signs of a follow through in the selling. So We’ll see what happens.
Energy stocks, especially natural gas are back en vogue. Btt, technology and biotechnology stocks are the sectors to watch, as well as the 2100 area on the Nasdaq. The S & P 500 1200 level is the other key resistance area for now. It would also be nice to see one good momentum thrust day, where the ratio of up volume to down volume on the NYSE would be at least 9 to 1.
This market still has to be traded from the long side, with the usual amount of caution and strict attention to trading rules.
In this market, stock and sector selection, along with strict adherence to buy and sell rules remains the key to success. Active traders should also keep their options open on the short side, while investors should still have a good amount of cash ready to spend when the market gives an all clear signal. Buying on strength, and sticking to using sell stops is still the key to success, for those with a short to intermediate term time horizon, especially in a narrowly traded market.
Remain patient. Take this market one day at a time, and be ready for reversals.
What To Do Now
Stick with strength. Keep an eye on the chip, and biotech sectors. Select energy stocks may also be worth some risk now on the long side. Don’t make big bets on any position, and have as many open positions as possible in order to diversify against the risk of a bad news event.
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