Breaking News in Egypt

January 29th saw a rare and bizarre event across Egypt, the police and internal security forces were absent the streets, only the military had taken up positions and the military has been warmly received by protesters. Apparently Mubarak in a last gasp effort to hold onto power took advantage of the long standing animosity between the police and the military and recalled the police in an effort to show the military what  would happen without the police presence in an effort to try to keep the military from undermining him. Ironically and perhaps showing a poor choice by Mubarak, the lack of police presence seems to have had the opposite effect with protesters calming.

In another perhaps, not so well though out move, Mubarak as of January 20th has recalled the police and internal security back onto the streets. As you may recall, there were widespread reports of police in plain clothes acting as protesters taking part in jail-breaks, arson, robberies of major banks, attacks and break-ins-this at the same time the police were recalled. Apparently Mubarak has negotiated a temporary stay of power, but his plan which is becoming transparent may very well backfire.

Mubarak seems to be counting on an ability to ride out the protests. While he is the main target of protests and a figure head of police brutality, that seems to be the only thing protesters agree on. As far as backing an opposition leader, there are major differences of opinion, from the non-secular Muslim Brotherhood with backing from Hamas to the secular attempt to grab the popular movement by Mohamed ElBaradei. Mubarak is counting on the lack of coalescence behind a central figure that can replace him while playing the police and internal security force against the military and all against the protesters.

Stratfor may have summed the situation up most articulately in calling it an "Iron Fist" tactic. The move is obviously dangerous as the point, removing Mubarak is still very much alive and the protests that have dwindled may very well rise up again once they realize that a shuffling of the cabinet was all that was achieved. Even more dangerously, there remains an elevated risk for conflict between the internal security forces and the military. One stray bullet finding the wrong target could ignite a very serious situation between the two.

I suspect by the time we awake tomorrow morning, the results of Mubarak's gamble will be known. In the meantime, gold and precious metals need to be watched. I see nothing to stand in the way of rising oil prices, except an eventual pullback that should be accumulated if the perception is that this may influence wider spread violence throughout the middle east. There are a lot of players on the sidelines that I'm quite sure will emerge at some point soon to capitalize on the situation.

Perhaps most interestingly will be whether the Fed can remain in control of the markets or at least the averages while Wall Street tries to discount the probabilities. We'll know son enough. As I have said for months know, the market's breadth is so bad, we are one major headline away from a major market correction.