The next phase of this campaign is finding out to what degree ISIS will take control of key Iraqi oil fields in the region and whether they intend to take Bagdad. Last time I checked they were within a 2 hour drive of the city. The X factor is going to be what U.S. military response is going to be. From what we’ve heard the US is considering all options at this point except sending in ground troops. The problem here is that it might take a massive push on the ground to defeat these barbarians.
Make no mistake, these are barbarians. The other thing you should know is that when the 5-year bear market during WWII ended in 1942 it did so as a result of information that exposed Hitler’s Germany as having maxed out their industrial capacity to wage war while we were only at about 20-25% of our capability. If you want more information on that you should go into the archives at Time Magazine. What does that mean? If you want to know how the outcome of this conflict is going to develop, you’ll never get a better indicator than the stock market. The market just knows that it knows that it knows.
So here’s what you need to watch. This is continuation of the Nasdaq chart with the multiple Andrews channels we’ve shown before. The fear of ISIS has made us violate another channel. I’ve told you what kind of mirage all this can be even as it pushes higher. Andrews’s strength pushes patterns to the left, not right. The next chart is oil. You’ve heard people talk about 112. This chart shows why 112 is a good level. Let’s hope this crisis ends there. It’s a massive triangle that started at the 2011 high I’ve discussed so many times in this space. The original high came as a result of a perfect Gann/Fibonacci storm the day after Osama Bin Laden was taken out.
Speaking of Osama Bin Laden I am of the opinion the new leader, the intrepid Abu Bakr al-Baghdadi is infinitely more dangerous than OBL ever was. He has already carved out a terrorist sate out of real estate from Iraq and Syria.
What is the takeaway from all of this? There is much more to financial markets than just watching Janet Yellen and Mario Draghi. One must understand the linkage between social mood and the Dow Jones Industrial Average. One must understand that several years after a very serious bear market bottom anger will rise to the surface out of those individuals who got left out of the recovery. Those who forget history are doomed to repeat it.