(The Weekly Digest reproduces the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers. )
AMERICAN AIR STRIKES ON AMERICAN WEAPONS, MARKETS REVERSE
In a Shakespearean tragedy, last night Obama authorized airstrikes on ISIS militants in Iraq if they move to take Erbil. The three-minute futures chart showing the timing of Obama announcement tells the story of stocks, gold, and oil. In the morning when ETFs started trading, GLD, SLV, SPY, DIA, and USO have traded in line with futures.
Please click here for annotated chart of stocks, gold and oil.
Right after Obama’s announcement stock futures started falling and gold futures started rising. At one point, DJIA futures were down over 100 points and gold futures hit $1319 breaking key resistance as $1315. As of this writing, cooler heads have prevailed, DJIA have turned positive and gold futures are falling. Traders who were watching oil futures have come out ahead because oil markets have a better understanding of Iraq.
Erbil is the largest city and also the capital of Kurdistan, a semi autonomous region in Iraq on its border with Turkey. ISIS are Suni jihadists.
It was not that long ago that in the face of advancing ISIS militants Iraqi army divisions simply changed from uniforms to civilian clothes and ran away without a fight. ISIS was able to capture their state of the art American supplied weapons worth several hundreds of millions of dollars.
Kurdistan has been defended by its own independent army called Pesh Merga. This is transformation of Kurdish guerrillas who fought Saddam Hussein.
Pesh Merga has been well thought of militarily, however, Pesh Merga is totally outgunned by state of the art American weapons that ISIS is now using. Kurds have been begging the United States for more weapons and ammunition. The United States has been reluctant to supply them with more weapons for the fear that such a move would weaken government in Bagdad. The other reason for reluctance is that such a move may infuriate Turkey. Turkey is an American ally and a member of NATO. Kurdish population spans both Iraq and Turkey. In the past, Turkey has repeatedly cracked down on the Kurds in Turkey who had been wanting independence.
The irony is that President Obama had to have intelligence that capital of Kurdistan would fall without American support for him to back away from his no military intervention policy in Iraq and authorize airstrikes on ISIS.
What Does Oil Know That Other Markets Do Not?
As dangerous as ISIS is, it is capitalist at heart. In its battle in Syria with government forces, it took precautions not to damage oil fields. When ISIS captured oil fields, it has been operating them and exporting the oil to finance its terrorist operations. It is likely that ISIS will follow the same policy in Iraq.
What To Do Now?
Watch oil. As long as oil is not rapidly rising, sell gold, sell gold miners using ETFs such as GDX and GDXJ, buy good stocks on dips, and short U. S. Treasuries using ETFs such as TBT and TBF.
Gold futures are at $1310, silver futures are at $19.96, and oil futures are $97.70.
S&P 500 resistance levels are 1911, 1925, and 1950; support levels are 1900, 1875, and 1850.
DJIA futures are up 20 points.
ANOTHER RALLY ATTEMPT IN THE EARLY GOING
Stock market is seeing another rally attempt in the early going. Italian stocks are performing much better after prior drubbing. Italian GDP number was one of the prime causes of drop in the U. S. stock market.
Attempts to rally oil and gold are meeting resistance.
Interest rates are range bound.
Gold futures are at $1305, silver futures are at $19.94, and oil futures are $97.01.
S&P 500 resistance levels are 1925, 1950, and 1975; support levels are 1911, 1900, and 1875.
DJIA futures are up 55 points.
UKRAINE, ITALIAN GDP AND FAILED DEALS PUT PRESSURE ON THE MARKET
The media is in a frenzy that started with a Polish official speculating that Russia may invade Ukraine.
GDP in Italy was below expectations causing concerns about progress in Europe.
A number of corporate deals have not gone the way market was positioned. Sprint is dropping the potential bid for TMUS. FOXA is dropping a bid for TWX. WAG is not moving its headquarters to Europe.
Interestingly gold is running on Ukraine but oil is not.
Interest rates are falling as investors rush into the safe haven of U. S. Treasuries.
In early trading the support at 1910 on S&P 500 is broken.
Gold futures are at $1298, silver futures are at $19.87, and oil futures are $97.60.
S&P 500 resistance levels are 1910, 1927, and 1950; support levels are 1900, 1875, and 1850.
DJIA futures are down 57 points.
S&P 500 MAJOR SUPPORT IS 1850
Major support in the S&P 500 is 1850, about 4% below where it is trading now.
Internals were weak during yesterday’s rally. At least in theory, the weak internals during the rally yesterday should lead to a lower market in the early going.
Oil is having a difficult time sustaining yesterday’s rally.
Gold and interest rates are range bound.
Gold futures are at $1289, silver futures are at $20.14, and oil futures are $98.16.
S&P 500 resistance levels are 1927, 1950, and 1975; support levels are 1910, 1900, and 1875.
DJIA futures are down 57 points.
STARTING THE WEEK WITH A BOUNCE
The stock market is likely to open with a bounce from very short term over sold conditions. Market internals during this bounce and how long it lasts will be a tell.
After opening lower gold is trying to rally.
After opening higher oil is drifting down.
Interest rates are range bound.
Gold futures are at $1295, silver futures are at $20.42, and oil futures are $97.64.
S&P 500 resistance levels are 1927, 1950, and 1975; support levels are 1910, 1900, and 1875.
DJIA futures are up 32 points.
