The Week Ahead

Quite a while ago when Mubarak was losing power in Egypt, we covered the situation in some depth, the bottom line is that since Nasser, the President of Egypt has been chosen by the military and has come from the military. This was the reason Mubarak was ultimately depose, BY TH MILITARY, he was grooming his son to take over the country which didn't sit well with the military council. At the time, I had talked a lot about different elements sneaking in to the country to help organize the Muslim Brotherhood, this weekend, we have a Muslim Brotherhood (former member as of the elections) for a president and it is not sitting well with the military.

I would not be surprised at all to see the very well organized political machinery of the military do everything they can to discredit Morsi and I wouldn't be surprised to see a coup. The military won't willingly let go of decades of controlling Egypt that easy. This is a much bigger event than people realize at present.

Carrying on with the MENA theme, as I'm sure you are aware, a Turkish jet was shot down by Syrian after briefly crossing in to Syrian airspace, but as Turkey claims, was shot down in international airspace, Syria claims it was in Syrian territorial waters.  Tensions have been rising for month as Turkey, a former ally of Assad, has called for him to step down. At the same time, the Saudi's are said to be funding a Syrian rebel army.

While Turkey is a NATO member and enjoys certain benefits should they request them, Syria doesn't stand alone as it has very valuable bases and strategic importance to both China and Russia, the 3 countries are planning the largest scale war game EVER.

As you may recall, I started a spec long option position in USO Friday on what I believe to be a bear trap move. Interestingly, take a look at the Euro on opening trade tonight, ES and Crude ...

 Th Euro gapped down on the open of FX trade this week.

 ES as you might expect on the EUR/USD has also seen some downside, 3C looks supportive though, at least at this early hour. With Euro weakness and dollar strength, we'd expect Crude to also be down in similar fashion...

Not quite the case. I haven't confirmed this version of 3C for crude futures, but thus far it has responded as it should. I suppose the MENA news is giving crude a bit of support, we did see a positive 3C chart Friday (the reason I started the USO trade Friday).

As for Europe, Spain will remain a point of focus as well as Italy and of course Greece.

Friday Germany made very clear they are very critical of the ECB's collateral acceptance/rating which will see the ECB accept collateral that would otherwise be junk. Germany not only criticized the ECB's decision, but made clear the Bundesbank won't be accepting similar collateral. It seems that whole North / South divide is heating up and Germany is making sure every one knows who it is that runs the show.

I have a feeling there will be a lot of verbal jousting in both MENA and the EU this week.

As for the technicals, the 3C 30-60 min divergences still suggest the market is not done with the upside move. We expected the market to pullback on 3C signals before the F_O_M_C and expected the F_O_M_C to disappoint the market. However what I was most interested in was how the risk asset held up in to a pullback, as demonstrated Friday, thus far they are holding up well; as such, I still expect market upside before the next primary trend leg down.

Oil will be interesting, after seeing the FX open, I expected oil futures to look worse based on correlations alone, but based on the fundamentals of MENA, it's hard to argue against oil seeing support from market uncertainty in two situations that could be quite a bit bigger than how they first appear.