The holidays are supposed to be a time where everything is quiet and the markets steadily go up to Jan 2nd. Everyone is celebrating with their families and enjoying the moment either at peace or with the hopes of a better year for peace coming up.
Well, things were quiet until a few days ago when the U.S. failed to veto a U.N. resolution that not only condemned settlements but put Israel’s borders back to the 1967 borders essentially making the western wall occupied territory. The holiest site for the Jews.
This has the potential to turn a stable area into another Syria and Libya catastrophe If it does the markets will plummet like a rock as this act by the outgoing administration has the potential to turn the new administration into direct conflict with Iran, China and Russia depending how each player decides to play it out.
Considering that the EU pretty much went along with the resolution I doubt the new administration is going to get any help at all from them. So it will the U.S. and Israel alone against the world so to speak if hostilities break out because of this act done 3 weeks before the transition of government.
Now, forget for a minute the pros and cons of the act itself. Put that aside and let’s think logically. If there is any one thing in geopolitical affairs it’s that alliances, promises, treaties etc are sacrosanct and are to be respected. That all parties have each other back in the event its needed.
As a perfect example of what I am talking about is Putin coming to the aid of Assad in Syria. Forget what you think of the players in this drama or their countries as its irrelevant for this example. Putin spent a lot of money, lives and capital doing what he did for Assad. But he did it because they had an agreement and he was not going to sit back and not fulfill it regardless of the cost. And he saved Assad from almost certain defeat.
That is what international promises is all about. It is sacrosanct otherwise everyone is on their own at the peril of whatever whims a stronger country tries to do for them. As a byproduct of this, it creates stability in the world and tends to bring countries closer together.
That is the understanding the U.S. had with Israel. The result of which created a flourishing Democracy in the Mideast which not only benefited Israel but benefited the world as the Country has been the leaders in medical research, water conservation, security and about every other thing you can think of . Israel has provided assistance to other countries whenever it has been needed including their neighbors some of who are hostile to them.
This break of the promises with Isreal by an outgoing administration is going to have severe consequences not only for Israel but for the world. In the Mideast, it will be like waving a red flag and igniting terrorism against Israel, In the U.S. it will create and almost impossible diplomatic crisis for the new administration after Jan 20th, In other parts of the world it will create untold anxieties as it will now be known that under no circumstances is the U.S. to be trusted. If the U.S. can do that to their “closest ally” than they will do it to anyone at any time at the whim of a recalcitrant President.
Of all things I have been talking about on the geopolitical front, this one thing has the potential to start World war 3.
So then why with only 3 weeks left in their administration would an outgoing President intentionally create an international crisis of untold proportions? That is a tough one to answer but one only needs look at 1. the decision to pull troops out of Iraq , the red line in Syria, the decision to forcibly remove Gadafi, and the deal with Iran sending them 150 billion and another 400 million in cash loaded onto a plane on pallets to understand that one more crisis 3 weeks before leaving office is not big deal for this administration.
That is the extent I am going to get into the reasons why this crisis has been created. It is of course much deeper than that but that is not the intent of this site to get into geopolitical events in great detail. But only to the extent necessary to allow readers to understand the gravity of the situation and how it might effect their investments.
This is a big one. Bigger than anything that has been taking place that we have talked about previously. I would be very careful with my investments at this time as things could explode at a moments notice. The Mideast was a powder keg waiting to explode before this happened this action by the U.S. just makes things more likely to explode.
So what is an investor to do. This is a story you want to stay on top of. I suspect there might be a window to either hedge or lighten up similar to the financial crisis 9 years ago. I was in Hawai at the time and loaded up in the markets. I thought that I would be looking at a 2000 down morning Monday. But it was only a few 100 points and I had time to orderly exit.
I keep up on these geopolitical events daily not only for trading but its fascinating to see the intricate dealings and decisions other countries make day to day. For the most part, countries create their own problems out of nothing. Which is not surprising as they are lead by humans.
Humans are the species that feel that its ok to kill in the name of religion, that it’s fine to discriminate based on any number of criteria, that their word means nothing except what means they are trying to accomplish. It makes me wish I was born a Vulcan as what I observe day to day between humans is staggering.
I have often thought that if the earth was an experiment by an outside entity to see how a planet filled with the human race would exist, the experiment would of ended a long time ago as a complete failure. Of all the species on the planet earth humans are the most destructive, illogical, and will not be content until they have destroyed themselves. That is the path I see the Human race on.
I apologize for the long winded rambling on a Monday morning just a few days before a new year. But his failure to veto at the U.N. is a self-inflicted wound to the U.S. which could very well be a critical wound.
Ok, on to some microanalysis. These big picture items are way too depressing. The markets are looking pretty good this morning 20 min before the open. I am long looking to get longer to play the tailwind into Jan 2nd. I am long right now more than usual and have no problems adding to my position.
The mean reversion trades I have been looking at have come close but then the markets wiggled away at the close each time. Funny how these markets tend to do that:) Looking at premarket I see no red flags. So today barring anything unusual is likely to start a nice breakout to new highs.
If you want to follow some of my trades along with my thoughts typically given after the open you can go to @rickjswings. Typically I talk about the overall day expected with the markets and also give some levels on the ES and NQ for failed breakout scalping.
It’s my private twitter feed for the stock market and its free. Sports Handicapping is the subscription-based part of this site. But considering the cost of joining it’s almost free:)
Good Luck Today
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