Technical Rally
Research for Online Investors

7/19/12

The market is rallying this morning.  Why?  Was it the disappointing British Retail Sales numbers that showed an increase of only 0.1% rather than the 1.5% increase in May?  Or, could it be the Spanish Bond sale of three-year and five-year issues at higher interest rates than last month, and a low bid-to-cover ratio because of lack of interest?

If those metrics didn’t create enthusiasm, it just had to be the weekly U.S. Initial Jobless claims up 34 thousand to 386k with a corresponding increase of 15,000 in continuing claims.  Yeh, that must have done it!

Economic reports should give us some indication of what the market is going to do.  Today not so well.  This is the nature of mob mentality.  Buy, Buy, Buy!  Technically, the market cleared a hurdle yesterday when it closed above 1371.  This was the upper trend line we have labeled in the chart of the S&P 500 below.

This morning we have climbed through 1374, this was the high from 7/3.  If we can close above this level, it seems (almost) certain the market will continue higher in the pattern that has been in place since the first week of June.  Our next resistance is at 1392, which is the high from 4/17.  Of course all is subject to bad headlines and poor economic reports, or is it?  If we close below 1374 today the jury will still be deliberating.

The civil war in Syria has moved to Damascus as rebels take control of some neighborhoods.  The rebels have also seized one of the Syrian-Turkey border checkpoints.  Syrian television showed President Assad swearing in his new defense minister.

Russia and China vetoed a U.N. Security Council draft resolution to apply sanctions to Syria this morning.  You will recall that President Obama called Russian President Putin yesterday to enlist his support for isolating Assad and calling for an orderly transition of power.  We have read in the past that offers have been made to Assad for safe passage out of the country to exile.  He refused.

Russia has refused to slow Assad’s use of the military against citizens.  They have sold him attack helicopters and other military hardware.  Rather than the U.S. painting Russia and China into a corner, President Obama keeps trying to give them a way out!

When Assad is dead, like Qadhafi in Libya, who will be to blame for the slaughter?  Who will have influence in Syria’s new government?  Let Russia and China make their beds now, they will have to lie in them later.

For now, the U.S. dithers.  The British and French are not as polite.  UK Ambassador, Sir Mark lyall Grant said “The U.K. is appalled by the decision of Russia and China to veto this draft resolution.  Russia and China are failing in their responsibilities as permanent security council members.”  Gerard Araud, the French ambassador, accused Russia and China of trying to buy time “for the Syrian regime to smash the opposition.  History will prove Russia and China wrong, and it will judge them.”

The Guardian has a good feed on the Syrian news story.  You can check and get the latest information.  I find myself continually reminded of Ed Klein’s book “The Amateur.”  Placing a community organizer in charge of our foreign policy could only happen in America.  To quote Klein, “a president who is inept in the arts of management and governance, who doesn’t learn from his mistakes…who blames all his problems on those with whom he disagrees…who clings to the narcissistic life of the presidency.”

The mailbag:
All evidence is contrary that the “rich” will stay put if taxes are increased. Even if they do, and perhaps many will, the remaining rich will change their behavior. Even when we had 70% and 90 % tax brackets, the Government has NEVER, ever been able to collect more than 21% of GDP in tax revenues. Why take a risk if the profits go into the black hole? Without lots of risk taking, we perish financially.  I enjoy your comments and pass them along.—subscriber R.R.

John’s reply: I don’t’ understand ignoring economics and natural human behavior.  This is typical of ideologues.  Thanks for passing along MarketToday to your friends.

Maxine Waters giving financial analysis?  Was that on the Comedy Channel?---Long-Term subscriber E.H.

Editor’s note:  I have just finished “Hard Measures” by Jose Rodriguez, Jr.  Mr. Rodriguez is an American Hero.  He worked for the CIA for over 31 years and ran the CIA’s Counter-Terrorism Center before retiring.  After leaving office he was threatened with prosecution by Obama’s Justice Department for destroying the video tapes of “enhanced interrogations.”  I hardily endorse this book.  I hope someday to meet Mr. Rodriguez and shake his hand.

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