Turning Point?

Luke Hodgens / Powerhouse Profits -- Dear reader, as you know, poor geopolitical news has had a tremendous effect on our markets lately. Prison abuse scandals, roadside bombings, assassinations and murders have caused the stock market to pull back significantly. Each time bad news hits the wires, the major averages dip.

This week, a whole slew of bad news has come out of the Middle East. Iran seized three British naval vessels, militant Muslims threatened the life of Iraq's Interim Prime Minister, Iyad Allawi, terrorists beheaded a South Korean interpreter and synchronized bombings occurred at police stations across Iraq. The news this week was horrific.

As a market analyst, my job is to digest both news and the markets' reaction to it. In the past few months, poor news from abroad would pull our market down. The market was ignoring positive economic data and focusing on fear. Even a flat tire on an Army Hum-Vee sent the markets into a tail spin.

But the times, they are a changing. It now appears that the market is more concerned with economics than bad news. Has the market become numb to violence? I don't think so. I believe the market now sees the upside potential of the economy as far outweighing problems abroad.

The way the market reacted to this week's violence tells me a bullish trend is just around the corner. While the price of gold has jumped over $8 an ounce this week, The Dow and S&P 500 traded flat and the NASDAQ gained about 2%. There was some fear factor that hit the market this week, as evident in the run in gold, but there was no spill over into stocks this time.

It may be premature to make this bullish assumption, but I feel this week's reaction is very positive. The market seems to have discounted not only for interest rate increases but for bad news. This may be a great time to buy as evidenced by this weeks chart.

While everyone has been continually bombarded with the bad news, I wanted to take a moment to relay some of the positive news out of Iraq.

There are now 20 Universities and 43 technical colleges operating in Iraq. There are now female Iraqi politicians, human rights councils, a boy scouts chapter, as much as 90% of Hussein's debt may be written off, the World Bank is providing $40 million to print 72 million textbooks for 6 million students: 600 titles for all 12 grades of the primary and secondary system, hospitals are opening up all across the nation, the electricity grid is larger than ever...Hussein's henchmen no longer torture civilians. The list goes on and on and on...

It is tough to put the good news into perspective as all we hear about is the negative. But come next week, Iraq will claim sovereignty and begin caring for herself as a democracy. Perhaps it's the coming democracy that the stock market likes. Perhaps the market is as optimistic as I am.

Luke Hodgens is the editor of
Powerhouse Profits a conservative investment newsletter. Click here to read more of his cogent analysis."

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