January 8, 2012
Weekly Market Outlook
By Keith Schneider
The U S Navy rescued an Iranian fishing vessel from pirates (Although Captain Jack Sparrow is still at large) this week, keeping the tensions between Iran and the West on a simmer rather than on a boil, where it was. It was a rare public relations coup for the US, and even reported so in the Iranian press. Meanwhile, upgraded sanctions against Iran have been approved by Obama. The closure of the Straits of Hormuz, by Iran where 25% of the world’s supply of crude flows thru, still looms as a threat to the Global Economy. For Cycle-ologists, it was 50 years ago, in October that the Cuban missile crises erupted, and a nuclear war was narrowly averted. Will history repeat? In Jan 1962, the first two weeks of the year started off with a Dow Industrials intraday decline low of almost 4% and the market went further south for the next 10 months, so if we hold up here in the upcoming week, we will certainly be going counter to a historical repeat of what played out 50 years ago. Additionally, we are keeping a close eye on how the market trades from the range established in the first two weeks of the year as that is often a good indicator.
A Greek default on its sovereign debt is casting a pall on the markets as well, but all this is tempered by a steadily improving US Economy. The big Hedge Fund players who are holding out for a payday on their credit default swaps, ( betting on a default, rather than a reduction in principle) hold about 40% of Greek debt and have divergent interest to the central banks trying to hold the Euro and their economies together. It’s a tough and close call but our guess is that a technical default will be avoided somehow. If true, then the markets may muddle thru and confound the “group think” that a default and global meltdown is inevitable. Meanwhile sentiment indicators are getting frothy so let’s go to this week’s video and see what the charts are telling us.
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