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U.S.: Is National Security A Myth? Oil: Testing $60. Stocks: Rally To Be Tested.
by Dr. Joe Duarte,
Dallas, TX, June 21, 2005 , 08:00 EST * excerpts from daily reports
Pre-Market Summary
Stocks will look to resume the recent up trend. Some more backing and filling is possible, though, as the Nasdaq continues to have problems with the 2100 area. Oil looks ready to consolidate around the $60 area. The Swedish central bank lowered interest rates by one half point overnight, citing worsening expectations for its own economy and blaming the poor performance of the broader European economy as the main reason for its own country’s slowing economy.
Fake Green Cards At The Nuclear Weapons Depot
On 6-20, the Washington Post reported that a group of illegal immigrants was working at the nuclear warhead production facility in Knoxville, Tennessee, and that they gained entry with fake documents.
According to the Post “Sixteen foreign-born construction workers with phony immigration documents were able to enter a nuclear weapons plant in eastern Tennessee because of lax security controls, a federal report said Monday. Controls at the Y-12 weapons plant have since been tightened and there was no evidence the workers had access to any sensitive documents, said the National Nuclear Security Administration, which oversees nuclear weapons facilities for the Department of Energy.”
The Post further added: “The report, initiated by a tip in 2004, said the workers had fake green cards that certified them to work in the United States. Their cases were turned over to the Immigration and Customs Enforcement agency for deportation.”
Most alarming is the following: “However, the DOE inspector general's office said in the report issued Monday that its field agents found "official use only" documents ["lying unprotected in a construction trailer which was accessed by the foreign construction workers"] at the plant. ["Thus, these individuals were afforded opportunities to access ... (this) information," ]the inspector general wrote. ["We concluded that this situation represented a potentially serious access control and security problem."]
Legions Of Ghosts Operate In Iraq
The U.S. is pinning its hopes of leaving Iraq, on Iraqi soldiers trained by the U.S. But, many of them can’t be found, suggesting the presence of high levels of infiltration and criminal activity at all steps of the process.
Newsweek, citing intelligence officials in Baghdad, whose clearances bar them from speaking publicly, over the weekend reported that “Iraq's security services have hundreds of "ghost soldiers" -- members who vanish, sometimes for months on end, but continue to draw their pay. The fear is that they are working for the insurgency while keeping up their ties in uniform. Early on, when training procedures were still being defined, U.S. forces tried to institute a program to screen Iraqi recruits, report Johnson and Liu. But with pressure on to find an exit strategy for Iraq -- and to build significant Iraqi forces fast -- a lot of doubtful characters seem to have slipped through the cracks. Gaps in the process were quickly exploited in a strategic campaign of infiltration by the insurgency.”
Still, digging deep into the Newsweek article shows one of the main reasons why the U.S. continues to face an uphill struggle in Iraq, as the insurgency, according to internal U.S. estimates may number as many as 400,000 people, when support personnel and other types of participants are counted. “ According to a U.S. Special Ops source, who required anonymity because of the sensitivity of his work, the insurgents include an estimated 1,000 foreign jihadists, 500 homegrown Iraqi jihadists, between 15,000 and 30,000 former regime elements and as many as 400,000 auxiliaries and support personnel. All told, the insurgency is believed to include upwards of 40 reasonably distinct groups that sometimes join forces for particular operations.”
Energy Sector
Oil Market Summary And Outlook: $60 Is New Pivot Point.
This week’s supply data, due out on Wednesday will be as important as any set of numbers due out this week.
Crude oil futures starting with September 2005, all the way into June 2006 were trading above $60 in pre U.S. trading action on 6-21, with the December 2010 contract still trading above $55, but some analysts are calling the current price trend “unsustainable.”
According to Marketwatch.com: ["Crude oil remains well bid, with the prevailing sentiment that it is only a question of when, and not if, crude would hit $60," Tim Evans, senior energy analyst at IFR Markets, wrote in a note to clients. "While there is this confident bullish assumption at play that prices can only trend higher, there is also abundant fundamental risk that these prices cannot be sustained."]
Bloomberg reported the following: [``The likelihood is that OPEC will soon come out with some talk about a further increase in quotas,'' said David Thurtell, a commodity strategist at Commonwealth Bank of Australia in Sydney.]
Still others are suggesting that any such announcements from OPEC would be met by more buying, since the prevailing opinion in the market now is that OPEC is maxed out on its ability to raise production, at least on the more easily refined grades of light sweet oil.
In fact, over the last few weeks, BP’s CEO, and Iranian officials have been quoted in wire services as saying that oil prices are not likely to come down for years.
Supplies continue to remain stable, although demand is rising, and the refinery bottleneck remains in place, with U.S. refineries working at over 95% capacity according to the latest figures.
Technical Summary
Technical Summary
Consolidation Possible
After a nice jump over the last few days, the market needs a rest. The key is whether the S & P 500 can remain above 1200 during any such pause, and whether the Nasdaq can finally close above 2100 convincingly and stay above the key round number chart point.
The NYSE advance decline line eked out a new high last week, on its daily chart, although the weekly chart ended up just shy of a new high.
The leadership in the S & P over the last few days has been the energy sector, with oil, natural gas, and utility stocks moving higher. Some stocks in the financial, biotech, medical service, HMO, technology and biotechnology sectors also acted well. 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.
Not much has changed. Although, we always doubt the lasting power of low volume rallies in the summer, this market still has to be traded from the long side, with the usual amount of caution and strict attention to trading rules. Still, if breadth continues to wither, and volume dries up, we might suggest packing things in for the summer.
See our energy section for updates. Our Fallen Angels portfolio and our Technology Investor sections are full of interesting looking trading suggestions. Small stocks also showed improvement.
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.
Check all our sections daily. See tech, biotech, Fallen Angels, and timing systems for the latest adjustments. Our ETF trading systems for energy, Spyders, Small Caps, and technology have also been updated.
