A Forewarning

“They think they are finalising the concept of Europe, but in my understanding they are destroying it.”

This is the view of non-other than Václav Klaus,once regarded a hero in western eyes,striving to bring a smooth democratic transition to his native Czech Republic in the last days of the Soviet Superstate.

He certainly has the experience that many contemporary politicians in Europe lack,on the failings,often tragic,of such an entity,seeing the ominous similarities between the good ol’ USSR and the rising European Superstate that the Brussel bureaucrats and other globalists try to carve-as an “answer” to the crisis..



A Rethink Under Way?

“But instead of worrying about a clash of civilizations or fantasizing about their convergence through a process of U.S.-led cultural globalization, we need to consider another option: a live-and-let-live arrangement under which national cultures evolve on their own, reflecting their unique histories, values and time horizons.”

Words from a very nice piece that touches upon a core issue in US strategic thinking and elite mentality,the exceptionalism of American values and how in practice they can lead to double standards and contradictory approaches.We will have to note,that in our belief,US will inevitably experience a shift in this mentality in the coming years,becoming somewhat more introverted,even though its “imperial apparatus” will likely remain as it is.And that,no matter whether it is the hard-line,pro intervention Republicans or the more missionary-oriented Democrats with their favourite NGOs,that manage to elect their candidate.




Oil Suffers Big Drop

A bad day for the “black gold” as it withdrew from the recent highs quite violently due to a report on increased inventories by 8.5milion barrels ,much greater than analysts expected.Oil(WTI) is set to end the session below the 92$ mark,the lowest since early August.
The 38.2% fibo level seems to be holding for now,and should it be tested,it will likely provide a strong support.Worth noting,is the fact that both the 200 MA and the 50 MA were breached,while the upper band defined by the three tops is setting a solid downward channel.

In our latest post related to oil,we commented on the critical-in a technical perspective-situation,that it was.The latest action confirms this view,while the tremendous spike in volatility -OVX reached a 3-year high of 75-is in line with what we expected.

China Asserts Itself

Tensions have been running quite high between China and Japan lately,due to an ongoing dispute over the contested Senkaku or as the Chinese call them,Diaoyu islands.This is nothing new of course since the dispute goes back more than a century,when China was still governed by the Qing dynasty,and Japan was at the end of the Meiji period.But the strategic importance of the islands was elevated in the late 1960s,when it was discovered that the seabed around them was potentially rich in oil and gas.A few days ago Japan decided to buy a group of the islands from their owner,the Kurihara family,eliciting an immediate response from China that dispatched several patrol boats as a show of force.

This can and should be interpreted as yet another sign of China’s confidence and resolution to assert control of what it considers a part of its sphere of influence,mainly the East China Sea,an effort that sets it in a path of confrontation with the region’s current master,the US,and its allies,Japan and South Korea.

It serves as a good indication that patriotic feelings run high in the “communist” country,a fact that its new leadership can use to its advantage should its economy,that many in the West-perhaps a bit spitefully-predict,suffers a hard-landing in the coming years.The tools by which Chinese leaders hope to become the dominant force of the region have been growing steadily,as China unveils yet another advanced fighter prototype,prepares to commission its first aircraft carrier ,and commences building a new class of destroyers,setting the foundations for a blue-water navy.

We will not dwell on the larger issue of what are the prospects for each of the aforementioned players here,but we will make a special note on how significant parts of the Chinese population reacted to Japan’s move-with a little official backing,no doubt-via this excellent piece from zerohedge,for as they say,a picture is worth a thousand words… http://www.zerohedge.com/news/postcards-furious-china





Dr.Doom Strikes Again


Good stuff from Dr.Doom,even though his more dire predictions,following the 2007 crash have not-yet-materialized.

But, as everyone kicks the can down the road, the can is getting heavier and, in the major emerging markets and advanced economies alike, is approaching a brick wall. Policymakers can either crash into that wall, or they can show the leadership and vision needed to dismantle it safely.”

The can,Dr.Roubini is referring to,is essentially the need to resolve the mounting global debt crisis,now affecting the EU and likely to soon affect the US as well.How long can markets ignore this brick wall is the fundamental question for every investor-analyst.In our view,only a massive write-off debt on a global scale can achieve this,but the powers-that-be appear not to have come with a plan to address it..Increased geopolitical tensions across the globe lately,serve as a reminder that the “other option”,namely war,is always available..

Oil at a Crossroad

With the ECB action being all the rage this past week,and speculation about it dominating the headlines for the past month or so,a few interesting moves in the oil price might have been slightly overlooked by investors as they focused on the rising bourses.Let us remedy that.

Oil (WTI) has rebounded quite significantly recently after failing to breach below the 75$ mark that could push it much further on the downside.Instead,after the June lows of 77.2$,it has now climbed back in the 93-97$ price range while exhibiting relevant stability,particularly for the past three weeks,with volatility being suppressed and the OVX(Oil Volatility Index) at 32.77.

This rise has now brought it in a technically critical territory as the 200 MA is close to being breached for the second time after 22/8 when the price retracted and two “close calls” in recent days.This was preceded by the breaking of the 100 MA by the 50 MA and the move by the price towards the upper band of a long term downward channel as well as the short-term bearish trendline as seen in the chart below.

Moreover,the 200 MA is now running parallel to the 38.2% fibo level that covers the full range of an M-pattern movement that commenced exactly 2 years ago and is still under formation-possibly culminating in a wedge-like formation,though it is still premature to say.A convincing breaking of the two would be a solid indication of a further rise ahead that would aim above the 100$ mark.If so,the upper band of the downward channel will likely be reached mid-term.As can also be seen in the chart,Oil has been trading above the Gann line defined by the June lows consistently for its rise but only this past week did it broke below it.Should the combined support of the 200 MA,the fibo level of 38.2% and the Gann line is not breached,then a consolidation in the 91-95$ level is to be expected.

In the longer term,the development of the wedge-pattern is to be given special attention for it can culminate in either a strong upper or downward movement.The macro bull trendline connecting the three lows of August 2010,October 2011 and June 2012 can form the lower band of such an upward movement that results eventually in a W-pattern.The Gann line drawn in the charts can likely provide a guide as to the future form of the second “/” part of the W-pattern if this bullish scenario is to materialize.In any case,Oil is at a critical short-term crossroad that can affect its macro trends in a profound way.