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Al Qaeda’s Starburst Pattern. Oil:Still Struggling. Stocks: Time To Get Out The Beach Chair.
by Dr. Joe Duarte,
Dallas, TX, July 25, 2005, 08:00 EST * excerpts from daily reports
Too many sudden crosscurrents, earnings, terrorism, the Yuan situation, and lots of tiredtraders who need a vacation could make the next few days a good time to sit and watch froma beach chair in between cold drinks.
Today’s Analysis: Al Qaeda: The Starburst Has Begun
Al-Qaeda’s most aggressive work is straight ahead, as the terrorist group isreportedly set to unleash over 1000 of its best trained operatives on key cities inEurope, with the London Underground attack marking the beginning of the offensive.
Indeed, if the reports are factual, and there is no reason to think them otherwise, giventhe recent action in London, and over the weekend in Egypt, Al-Qaeda is about to reach theStarburst stage, which in epidemiological terms describes the point at which an infection,borne on some kind of very mobile vector, begins to spread and becomes more than aninfection, a plague.
According to Debka, com, Al-Qaeda has reached a critical point in Iraq. It has nowcommandeered control of the Anbar province, under the command, of Jordanian mastermind AbuMusab al-Zarqawi, and is using the province as a base of operations. Having trained theIraqi insurgency to a point that apparently is self sufficient, Al-Qaeda is now ready toexpand operations beyond Iraq, and to unleash a new nearly global offensive. The targetedcountries, according to Debka are “Britain, Italy, France, Denmark, Russia –with the UK and Italy at the top of the list; and, In the Middle East, Egypt, Syria,Jordan, Saudi Arabia and Israel. “ Debka also reported that Zarqawi in one recentrelease, noted “Israel is in our sights – and very soon.”
Citing the inevitable double secret anonymous sources, the tabloid-like, but uncannilyaccurate at times Debka, reported: “According to our sources, the organization’snetworks are now operating across the Middle East, Europe and West Africa from aheadquarters established by Zarqawi in Iraq’s western province of Anbar. This largearea bordering Syria, Jordan and Saudi Arabia has passed under his control. To relayoperatives, instructions, explosives and funds to the bomber teams on the ground, theJordanian terrorist is working with Middle East criminal smuggling rings linked toEuropean and African mafias.”
Debka expanded its analysis: “While theBush administrations prepares a troop buildup in Iraq, al Qaeda is engaged in theelaborate logistic process of shifting 1,000-1,200 terror combatants out of Iraq andgetting them ready to fight on new warfronts. Everything is done in total secrecy. Theterrorists are first repatriated to their countries of origin and provided with newpassports and identities, before going on to join networks in Europe and the Middle East.Reporting exclusively on these surreptitious movements, DEBKA-Net-Weekly’s Al Qaedaand counter-terror experts estimate that the terror group has already kicked off its newoffensive. The coordinated bomb blasts on three London Tube trains and a bus on July 7 wasone of its initial strikes – although not the only one - and there are more are tocome. At least two major attacks already carried out in London and Damascus herald the newterror offensive.”
Ambiguous Data On Syria
According to Debka, a recent shootout on Qassioun Mountain, a resort area overlookingDamascus, on July 4, was more than the Syrian government revealed. AP reported thesituation as one in which “its security forces clashed Monday with a band ofmilitants - including former bodyguards of toppled Iraqi leader Saddam Hussein and othersinvolved in the insurgency in Iraq.”
AP wrote: “ The battle reportedly erupted at 1 a.m. on Qassioun Mountain, whichoverlooks Damascus. One policeman was killed and two were injured along with two soldiers,the official news agency SANA reported, quoting an unidentified Information Ministryofficial. After the battle, security forces were pursuing a number of suspects whoescaped, the report said. It was not clear how many suspected militants were involved inthe battle, and security officials kept journalists from the scene. During the clashes,security forces captured a Jordanian suspected militant, Sharif Ayed Saeed al-Smady, andthe wife of his brother, Mohammed al-Smady, known as Mohammed Islam, the officialsaid.”
Contrary to the sketchy AP reporting, Debka noted the following: “The Syrianauthorities have never released any figures or details of this attack. Scores are believedto have died and hundreds injured, including holidaymakers from Gulf Arab states, when abusload of armed men opened fire on the teeming cafes and restaurants of the MountQassioun resort overlooking the Syrian capital. DEBKA-Net-Weekly reveals here for thefirst time that it was the work of a Jordanian crime mob known as the Semadi Gang. Theywere aided by several al Qaeda adherents who were resting in Syria from their terroristactivity in Iraq.”
Energy Sector
Oil Market Summary And Outlook: Rethinking The Yuan
September crude oil drifted lower overnight, as traders began to reassess their views onthe demand side of the equation. Some are expecting a slowing in travel due to the latestwave of terrorism in London, and expectations of more to come.
Others are taking a less dramatic view of the hurricane season, which still has a long wayto go before ending in November.
And third, despite Friday’s bounce on expectations of a rise in the Chinese economydue to the Yuan revaluation, the markets seem to be moving back to a more wait and seeattitude.
That leaves the $60 area, once again, as the key round number that the oil markets need towatch. December crude is above $60, but the new front month September is not. Oil stockswill have to hold to Friday’s gains or the whole thing will once again unravel.
Still, there is the supply side to think about, which at this point is fairly well takencare of.
So, with oil inventories reasonably well supplied, until proven otherwise, oil traders arescratching their heads about the Yuan. Conventional wisdom says that the demand for oilfrom China should slow down. But if the revaluation causes money flows to increase towardChina, it could continue to fuel rapid economic growth and actually boost oil prices
We’ll say it again. Nothing is etched in stone in the oil markets, especially duringthe mega bull market of all time, which is still unfolding. But, the action lately hasbeen less than inspiring for the bulls. In other words, it’s always possible thatwe’ve seen the top, at least on a short term basis.
Our very long term opinion on oil has not changed. We are still in a very long term bullmarket in oil, until proven otherwise. The long term line in the sand, for us, remains $40per barrel.
The Philadelphia Oil Service Index (OSX) made all time highs on 7-22, but may be pressedto hold onto the lofty levels reached.
Chart Courtesy of StockCharts.com
TechnicalSummary
Chart Courtesy of StockCharts.com
Air Pockets Make Us Worry
This market, although still o.k. on the surface, may be showing signs of some slighterosion, at least on the edges.
No one really noticed them, but on Friday, even when the market delivered a fairly goodday on the major indexes, there were lots of air pockets, or stocks that delivered badnews and got taken out badly. That has not happened in a long time, and in our opinion issomething to worry about.
The highest profile air pocket was Google, which was still struggling in overnighttrading. Google has been this market’s poster child since its IPO. If Google takes apowder, it could be a very bad sign of more nastiness to come.
Otherwise, market breadth is still in fairly good shape, with the advance decline linemaking several new highs lately, and also a new weekly high on 7-22.
Biotech stocks ran into a fairly stiff head wind on 7-22, and chip equipment stocks alsoshowed some signs of getting tired.
The Nasdaq and the S & P 500 both took out more short term resistance levels.
That’s why every day we note: Investors and traders should remain vigilant, though,as major global events are possible now on a daily basis, and could disrupt markets.
For now, we remain cautiously positive on this market, and our stock lists reflect it. Theheavy weighing of our picks remains toward smaller stocks, which are the ones doing theheavy lifting for now. Our ETF timing systems are also in position to profit from higherprices. And our Fallen Angels portfolio is well positioned once again.
Remain patient. Buy strength. Take this market one day at a time, and be ready forreversals.
What To Do Now
It’s time to buy stocks that are acting well, and to keep sell stops within dailysights. Tech and biotech continue to fit the bill.
Chart Courtesy of StockCharts.com
