| Dr. Joe Duarte's Market Daily I.Q. Intelligence, Market Timing, And Trading Strategy For Traders and Investors | ||||||
| Interesting Moves In Iraq. Market To Try To Move Higher. | ||||||
| by Dr. Joe Duarte, Dallas, TX, February 18, 2004, 08:00 EST What's Happening The pre-market stock futures were holding onto gains scored on 2-17. The U.S. Dollar was mixed, but mostly higher. Asian markets were mixed . European markets were slightly higher. U.S. Treasury bond yields were stable. The U.S. Ten Year note was trading with a yield of 4.02% in electronic trading. Crude oil was trading above $35. Gold was trading above $416. The economic calendar for February 18, 2004: MBA Refinancing Index. ICSC-UBS Store Sales Index For Feb 14 Wk. January Housing Starts. Redbook Retail Sales Index For Feb 14 Wk. The United States is facing a set of difficult choices in Iraq. The fallout from faulty intelligence goes beyond the lack of a WMD find. As time passes, and the difficulty of the task at hand becomes increasingly clear, the potential for a set of sweeping changes in the way the U.S. is doing business in Iraq is increasing. Evidence is increasingly available that leaves the U.S. little choice but to engage in a major, swift, and dramatic change in tactics. The only question is whether the Bush administration wants to risk the potential fallout in an election year. Inside And Outside Jobs In Iraq The frequency, accuracy, and ferocity of insurgent attacks in Iraq, has been the subject of significant attention in the intelligence chatter circles of late. One of the more interesting and less speculative sounding reports comes from the usually reliable source, Middle East Newsline.
According to the site: “ The Iranian-sponsored Hizbullah is suspected of having joined forces with Sunni insurgents in the campaign to expel U.S. troops from Iraq.: Quoting Iraqi security sources, the web site reported that “they have collected unspecified evidence that Ansar Al Islam, the Al Qaida-aligned insurgency group, has acquired the services of Hizbullah to help attack U.S. forces in parts of the Sunni Triangle. The sources said Hizbullah combatants were believed to have provided training and guidance in coordinated attacks on U.S. and Iraqi security positions. Few of the Hizbullah operatives participated in the attacks. More than 500 Hizbullah combatants arrived in Iraq from Lebanon during 2003, the sources said. Most of them have resettled in Shi'ite cities in central and southern Iraq. But over the last two months, the sources said, scores of Hizbullah fighters were believed to have crossed into northern Iraq to join Ansar. They said Ansar has benefited from Iranian weaponry, logistics support and safe haven and Teheran might have approved or encouraged the services of Hizbullah for Ansar.” The escalation of violence comes at a time when the U.S. is suddenly hardening its stance on key issues in Iraq. According to published reports, U.S. Civilian Administrator in Iraq, L. Paul Bremer has recently noted that he wold oppose the use of Islamic law as the basis of a new constitution for Iraq, but would support language that calls for religious toleration and empowering women. Security Forces Infiltrated As the deadline for the return of some kind of Iraqi sovereignty approaches, life for the United States is becoming more difficult, especially in the Sunni dominated areas of the country, where attacks against Iraqi citizens that are cooperating with the U.S. are increasing, and becoming increasingly effective. The item above, from Middle East Newsline, suggests that a significant and well organized outside influence is involved. But there seems to be more going on. According to the Washington Times: “U.S. officials in Baghdad said yesterday (2-16) that sympathizers of Saddam Hussein's Ba'ath Party may have infiltrated the coalition's security forces and supplied inside information to insurgents. The statements came in the aftermath of a brazen attack by pro-Ba'athists on a Fallujah police station during the weekend that killed 25 Iraqi police officers.” The article continued by saying that “Americans in the capital, Baghdad, said the attackers may have been aided by information from inside police headquarters and that the mayor of Fallujah had been detained for questioning. Insurgents had attacked the same police compound Thursday when Gen. John Abizaid, the four-star chief of U.S. Central Command, was paying a visit. He was not harmed.” The Times, quoted several U.S. sources, as describing a careful screening process involved in choosing Iraqis for security related jobs. ["I think there's always a risk, anytime you have any organization stood up, such as the Iraqi Civil Defense Corps or the Iraqi security forces,"] said , deputy director for operations of Combined Joint Task Force 7 in Baghdad. ["We do have a very careful vetting process. That process is very good, but it's not fail-safe nor foolproof."] Daniel Senor, a spokesman for the Coalition Provisional Authority, told reporters. Mr. Senor said the U.S.-appointed Iraqi Governing Council surveys the credentials and resumes of job-seeking Iraqis. It has a strict policy of rejecting members of Saddam's ousted ruling party. “ A Council Whose Time Has Expired But, should the U.S. rely so much on the Governing Council? Recent reports in the New York Times, including a thought provoking column by Maureen Dowd, quoted in this space yesterday, suggest that council member Ahmed Chalabi, may have been at least partially responsible for some of the faulty intelligence given to the U.S. about WMD. Furthermore, according to the Washington Post, on 2-17, the Iraqi Governing Council is no longer supporting the U.S. plan for some kind of electoral process and handing over of power to Iraq through such a process. The Post reported that: “most members of Iraq's U.S.-appointed Governing Council no longer support the Bush administration's plan to choose an interim government through caucuses and instead want the council to assume sovereignty until elections can be held, several members have said.” The Post quoted council members from both the Sunni and Kurdish factions as opposing the plan, which has been opposed by prominent Shiite cleric Ayatollah al Sistani. ["It's hard to imagine pulling off the caucuses without the Governing Council," one U.S. official said. "What happens when these people -- people we selected -- say they do not support the process? It can't work."] But, the Post added a more plausible explanation for the reversal, when it noted that: “senior U.S. officials said the council's motives were largely selfish. With elections likely by early next year at the latest, sovereignty could give council members unrivaled political influence in the months before the vote, allowing them to engage in patronage and skew balloting rules.” The Washington Post added: “Ahmed Chalabi, a moderate Shiite who has been an ally of many in the Bush administration, also has rejected the caucus plan, calling for elections before June. If that does not occur, an official of Chalabi's Iraqi National Congress said, the organization would also support a handover of sovereignty to the Governing Council.” More Polarization Evident The New York Times, on 2-18 reported that the Shiites and Kurds are now calling for partial elections, which would exclude the Sunni regions, since that is where the major violence is now taking place. “Shiite leaders are pushing a new plan for the transfer of power in Iraq that calls for partial elections, with balloting in the relatively secure Shiite and Kurdish areas but not in the more turbulent ["Sunni triangle."] The proposal, which has grown out of an emerging alliance between Kurdish and Shiite political parties, is part of the intensifying scramble for power among politicians before the United Nations announcement, expected this week, on whether election are feasible in Iraq.” And there is now more evidence that the Shiites and the Kurds are attempting to forge an alliance: “On Sunday, Jalal Talabani, head of the Patriotic Union and a member of the Governing Council, traveled to the holy Shiite city of Najaf, where he met with Grand Ayatollah Ali al-Sistani, spiritual leader of Iraq's Shiites. After a two-and-a-half-hour meeting, Mr. Talabani said, ["We have big hope in our Shia brothers."] The Shiite response, also hints at an interesting set of developments: “Ayatollah Muhammad al-Yaqobi, a cleric and part of the inner circle of Shiite leadership, called the partial election plan, ["the lesser of two evils." "There is no perfect solution,"] he said in an interview in Najaf. ["But we have 10 stable provinces south of Baghdad where it's possible to have elections right now, and the Kurdistan areas have had their own government for 12 years. As for the Sunni areas, they can do what suits them best."] Conclusion The bottom line is that once again the U.S. seems to have fallen prey to bad intelligence. This time, it isn’t about WMD. It’s about having picked the wrong people to put in charge of the first interim authority in Iraq, as it is obvious that this group, not surprisingly, is driven by that old black magic in politics, self interest. Furthermore, the U.S. now faces the possibility of having to consider what it has discarded in the past, the possibility of splitting Iraq into three separate regions, and concentrating its military efforts on quelling the violence in the Sunni triangle, where Saddam’s former strongholds refuse to give in to the new reality of its circumstance. The bottom may be falling out of the whole thing, as the U.S. could be losing its patience: ["There are no good options for us,"] one American involved in the political transition said. ["Every choice has deep flaws."] And the emerging rhetoric from Washington seems to be that the Iraqi Governing Council has outlived its usefulness. ["The Governing Council has been an effective body during this phase, but is it the appropriate body to hand over total sovereignty to?" ] a senior U.S. official asked. ["Is it sufficiently representative? Who is it accountable to? Will it be viewed as legitimate by the Iraqi people?"]  FibTimer.com - Active market timing signals, using both bull and bear positions, for index fund and gold fund mutual fund traders. Our use of Fibonacci & Elliot Wave analysis produces timing signals that have "always" beaten the market. If your fund accounts are down this year, try our timing service. For a free two week trial Click Here! Our expectation, based on the information provided by credible sources is that a big shakeup in the Iraqi Governing Council is right around the corner. A pattern that has provided good clues in the past, has been when Civil Administrator Bremer has traveled to Washington and met with President Bush. If Bremer suddenly appears at the White House, we would expect a big move within days of his return to Iraq. According to the Washington Post: “Asked about the possibility of transferring sovereignty to the council, Bremer said Monday that he was looking at ways ["to broaden the representation in the political process"] but wants to see (U.N. envoy) Brahimi's report (about possible Iraqi elections) before making any decisions.” Our bet is that the U.S. could settle for a divide and conquer strategy, with a three way territorial split in Iraq. A peaceful Shiite and Kurdish region above and below a wild and crazy Sunni triangle, would not be a bad interim compromise for the U.S. prior to the election. And if Bush wins, we would expect that one of the first steps in the new administration would be an all out attack on the Sunni triangle aimed to once and for all ending the Baathist hold on the region.  Chart Courtesy of StockCharts.com Stocks rallied in low volume on 2-17. But despite the low volume, the NYSE advance decline line delivered a new high, and the broad market indexes, especially the small stock Russell 2000 and S & P Small Cap 600, and Value Line are within one or two good days of new highs. The S & P 500 moved back above 1150, and above its 20 day moving average. The key is what happens near the 1158 area, where SPX has run into trouble in the last few weeks. The index tested its support at 1090-1126 successfully on 1-29, but has done little to the upside since. The 200 day moving average for the S & P 500 is near 1031, providing bull market level support. The market will now be trying to move through the 1138-1169 band. The Nasdaq is clearly at a disadvantage in the current market with the 2100 level still providing significant resistance above. The index closed last week near 2050, after failing to close above the 2100- 2150 trading band. The index could be headed for 2000 or lower it if continues to fail. The 20 day moving average is still resistance, while the 50 day moving average is support. Long term support at the 200 day moving average at 1827. 2186-2256 is the next upside target. The small stocks remained above the support at their 50 day moving averages. Both the Russell 2000 and the S & P Small Cap 600 indexes are within striking distance of new highs.  Chart Courtesy of StockCharts.com
To subscribe and receive the fully detailed version Click Here. |
