Saturday, August 20, 2011

Is Oil Sending a Signal?

As traders we get to wear a lot of hats. Besides digesting corporate news, earnings, and balance sheets, we also have to understand various macro issues affecting the market like economy, business cycle, government policies, and geopolitics. The latter was an early contributor to this year's market turbulence. The Arab Spring, which President Obama talks about in his every speech, contributed to the downturn of world economy. And he is very correct to point that out. It all began there. Oil went up and caused an energy shock to economies around the world. Libya is still off-line and is not coming back any time soon. Fighting there has intensified again. And now we have another serious problem brewing! Folks, I want you to start paying a very close attention to what is happening in Syria, Egypt, and Israel right now. Have one of your eyes on the newswires all the time. I am not scaring you, nor trying to be an alarmist. But when I hear those three countries being mentioned in the same news report, it sends goosebumps down my spine. We have been preoccupied with macroeconomics, government policies, and sovereign debt concerns. Geopolitics fell off the radar for a while. Well, I say they are just around the corner, and we are to be ready for some turbulence due to the latest developments. Keep your eyes on oil, Brent specifically. It will react first. It was up on Friday while all stock markets went down a lot.

This is just my opinion... 

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