The editor of Futures, Dan Collins, and I used to have discussions concerning what could possibly be the news event that would materialize when one of these time windows hit. As you know, arguably the biggest time window season since 2007 is now upon us as we hit the 260th week (to the day) last Friday from the Haines bottom set in March 2009.
According to geopolitical experts, the situation in the Ukraine is potentially the most dangerous incident in Europe since the Soviet invasion of Czechoslovakia in 1968. Let me see if I can lay this out for you.
Imagine if Texas were to secede from the United States. It’s ridiculous and not going to happen, but based on the extreme politics in this country right now, if there ever was a state that could secede, it would be the Lone Star State. I’m not suggesting in any way that Texas do secede, but there have been those who have suggested it. So, the Ukraine is part of the Soviet Union and an integral part of the WWII memory. The Germans invaded and took the Ukraine while the Soviets worked hard to liberate it. The worst slaughter of the war took place in a ravine called Babi Yar, where the Nazis killed 33,000 Jews in a weekend in the outskirts of Kiev. Understand there’s a lot of blood money concerning the Ukraine. Those of us in the West can’t even begin to understand the strange relationship between Russia and the Ukraine. However politicians draw up those boundary lines, the Ukraine is a part of the Russian culture. That’s what makes this conflict so complex.
To be certain, when the Ukraine became a country, they developed a relationship with NATO, which is what Putin or any Russian leader would see as the point of contention.
It's one thing that Cuba became an ally of the Soviets being just 90 miles from Miami, but it would be on an entirely different level if Texas or some other state (having seceded) would befriend Russia or China.
Now we have the problem where part of the Ukraine is loyal to Russia and part wants to embrace the European Union, which is how this dispute started. Troops are already there to protect “ethnic Russians,” and just the other day President Obama made a speech where he said there would be “costs” to Russian military intervention. He didn’t say what those costs would be, but Russia is already intervening. They outfoxed us in Syria; you think a place really important to the Russians is going to turn out differently? I told you there would be long-term implications to us losing our leverage in the Middle East.
So this goes deeper than just a garden-variety conflict. The mere fact it's materializing in the big time window season means it should be taken seriously. Markets may be looking for an excuse to sell because it’s that time, but this is the kind of crisis that can shift the geopolitical balance of the world as we know it. Something can shift (like it did in 2007), and the world might never be the same again.
Back in 2007, I told you as early as April there existed a good chance by the fall there would be a pivot that would be the most important change of direction for the entire decade. I was wrong; it turned out to be the most important pivot in our generation. There were at least three major high-probability turn dates with the last one being Oct. 12. As you know, we got the turn right there, but the ones leading up to that turn also produced interesting reactions. So here it is, we already hit the first one on Friday and we have Russian military intervention.
I told you last week the highest probability points are March 10 and March 20. This is just the beginning. I’m not even going to begin to predict what will happen in the next two. But here’s the picture as of early Sunday evening in the ES. This move up has been so parabolic and without normal Fibonacci form, the only way I’ve been able to navigate it is with the Andrews channels. Quite frankly they’ve done an outstanding job.
Going back to Feb. 12 when the price action hit the upper Andrews line for the first time, it continued to hug the line, but as the month progressed the pattern weakened. You can watch this with the same degree of accuracy as you would the jet stream on The Weather Channel. I told clients the pattern was weakening even as it continued to make new highs. It’s not important the pattern makes new highs. What is important is where in the channel are those highs are made. In a bull move, the upper channels are considered to be the path of least resistance. Once they get to the lower rising lines, it’s as if they are fighting the tide. As you can see, prices slowly lost aerodynamic lift as it moved across the page. Finally, as we hit time-window season, this pattern fell out of the bullish trend channels that have protected it since Feb. 5.
Next page: Where can prices go?