Dr. Joe Duarte's Market I.Q.
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Iraq: Green Zone Bomb Turning Point. Oil & Commodities: Prelude To Summer. Stocks: Steady Remains The Word.
Traders seem convinced that this rally has more room to rise. But how many more private equity deals are left to do?
Today's Economic Calendar: 8:30a.m. March Retail Sales. Expected: +0.5%. Previous: +0.1%. 8:30a.m. March Retail Sales, Ex-Autos. Expected: +0.8%. Previous: -0.1%. 8:30a.m Apr NY Fed Manufacturing Index. Previous: 1.85. 9:00a.m. Feb Treasury International Capital Flows. $74.6B. 10:00a.m. Feb Business Inventories. Previous: +0.2% 1:00p.m. Apr NAHB Housing Index. Previous: 36. Sources: Wall Street Journal.com, Marketwatch.com.
Iraq: Green Zone Bomb Turning Point
An End Run Of Sorts
Baghdad is at the boiling point, and unless something is reversed soon, the situation in the city could completely unravel into irreparable disorder.
The recent bombing in Baghdad's Green Zone has plunged the country and U.S. foreign policy into further disarray, with unforeseen developments on multiple levels.
First and foremost, indications are that the bombing was an inside job. Three Iraqi employees inside the Green Zone, the so called high security zone housing the center of Baghdad's government, have been arrested for "questioning," while the suicide bomber has been indentified as a body guard for a Sunni lawmaker.
A little known fact that is central to the success of the mission, though, is that security for at least a portion the Green Zone has been in the hands of the Iraqi security forces for some time. According to Stratfor.com, the convention center, where the Parliament holds sessions, and where the bombing took place, is such a place, where Iraqi security is in charge.
Stratfor noted: "Security at the convention center itself, however, has been the responsibility of Iraqi security forces since the Iraqis requested the facility be turned over to them, saying security procedures employed by U.S. troops were too intrusive. This enables people to enter the convention center without having to be cleared for the rest of the Green Zone. Since the Iraqis took over security at the center, a number of incidents have occurred in and around the facility, including attempted abductions."
In fact, Baghdad is starting to resemble a place which is beyond repair, as the number of suicide bomb attacks is on the rise, while AP reported Iraqi police demonstrating outside police stations and accusing U.S. troops of 'treating them like "animals" and "slaves."'
In other words, it is becoming increasingly clear that the U.S. is going to have to employ signficantly harsh measures in the city just to preserve the unstable stalemate that it has achieved so far.
According to Stratfor.com, "insurgents have infiltrated the Iraqi government and security forces." That is not necessarily new information. Yet, the recent activity in Baghdad suggests that the infiltration has reached a new level of sophistication and effectiveness, and that there is a significant offensive under way to undermine the resolve of the U.S. in its bid to remain in the country.
The pace of the onslaught is increasig, with AP reporting four significant explosions in Baghdad on April 16th, many timed within minutes of each other in order to attack rescue parties as well as anyone interested in helping the injured.
Cars, minibuses, roadside bombs, and suicide bombers are now being deployed systematically, while political pressure is being applied by Muqtada Al-Sadr, the radical Shia cleric who is threatening to pull his six parliamentarians from the government, essentially pulling the run out from the current government.
To be sure, some reports are suggesting that the Green Zone bombing has pulled together both Sunni and Shia parliamentarians, who are now likely to put pressure on insurgents.
According to the U.K.'s Telegraph: "The government has been rallying the tribes of Anbar province in the western desert against al-Qaeda, which appears to have made a tactical error by targeting tribal leaders who had been reluctant to join their bombing campaign against Shia civilians. The result has been a wave of clan-based retribution against the foreign terrorist network in the Sunni heartland."
Conclusion
Baghdad is in danger of falling to the insurgents, at least on a psychological level. A successful attack inside the Green Zone is a major blow to any hope left for the U.S. to bring some kind of sensible end to this war.
More than likely things are about to get worse.
As Stratfor puts it: "Because of the density of high-value targets in the zone and its political and symbolic significance, the Green Zone remains an attractive target for militants. This successful attack will serve to encourage other suicide bombers."
Chart Courtesy of StockCharts.com
The Wilderhill Clean Energy Index has broken above 200, an interesting development, showing some strength.
Chart Courtesy of StockCharts.com
Crude oil prices are still testing the $65 area.
Chart Courtesy of StockCharts.com
The Philadelphia Oil Service Index (OSX) has moved above 200.
Chart Courtesy of StockCharts.com
The Amex Oil Index (XOI) is now testing its all time highs once again.
Technical Summary:
Chart Courtesy of StockCharts.com
Still Technically Decent
Despite two days of heavy selling since the March 21 bottom, the stock market has remained fairly decent as measured by the NYSE advance decline line and the number of stocks making new 52 week highs.
These traditional measures of market breadth and momentum have yet to falter, and continue to signal higher prices ahead.
To be sure, you have to be in the right sector and the right stock to make money in this market, as traditional leadership, such as large cap technology and banking stocks have not done particularly well lately.
Instead, we've seen a rekindling of the fires in energy and metal stocks, two less than glamourous sectors.
We've also seen a resurgence in biotech, and of late a moderate surge in large cap drug stocks.
Thus, the big picture is that the up trend remains intact, while selectivity remains the key to success.
From a longer term stand point, based on historical trends, this should be a positive year for stocks, given the fact that it's the third year of the Presidential Cycle, which calls for rallies in the third and fourth years of a presidency.
Our long term forecast remains upbeat, unless the major indexes fall convincingly below their 200 day moving averages.
What To Do Now
Continue to build positions in strong stocks. Remain careful about placing, monitoring, and adjusting sell stops. See our lists for ideas.
Visit all our individual sections, both our ETF and individual stock picks daily for new ideas, and changes to open positions.
Be very methodical about monitoring portfolios, adhering to trading rules, and ratcheting up sell stops is clearly still here.
Second guessing decisions, and hoping that things will turn out o.k. in the long haul, is the recipe for disaster at a time like this in the market.
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.
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
Citigroup and Goldman Sachs are important sector bellwethers, and can often predict the general direction of the market.
Yet, at the current time, it's difficult to predict whether the market is paying attention to these two stocks.
For one thing, the market is clearly in rally mode, although not in a very robust way. Yet, these two usually stout stocks in bull trends are lagging.
Citigroup is a decent barometer of the big banks, and its lack of performance should be of some concern, although the company has had its internal management problems of late, and has had some missteps.
Goldman, though, has been firing on all cylinders, at least on its earnings, given the huge private equity boom of late.
To see these two stocks struggle, raises important questions. If the market is not interested in these two, then is it because there are stock specific reasons to ignore them, or because the current rally is generally weak?
Time, will of course answer all our questions on the subject.
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
Small stocks are showing some relative strength.
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