With the crude oil market hitting fresh new lows at $43, below is a key piece that warns as Europe disintegrates and the grand experiment runs into more trouble with each passing day, a full-scale war may now be on the horizon.
By Art Cashin Director of Floor Operations at UBS
January 29 (King World News) – When the statement hit, the stock market embarked on the now apparently mandatory 15 minutes of frenzied zigzag trading.
Initially, they shot up, taking the Dow back to, and very slightly through its earlier highs. After the initial brief frenzy, stocks eased back and made a lower low around 2:40.
They then made a brief but futile attempt at a rally. When that failed around 3:00, things really turned ugly. Stocks fell in an almost vertical line.
Meanwhile, over in the treasury market, a sharp rally broke out, accelerating as it moved through some key technical mileposts. The bond rally countered those who maintained that the stock selloff was caused by the hint of a looming hike in the FOMC statement.
Many traders felt a big contributor to the stock selloff was renewed weakness in crude, which threatened to break down out of the rectangular basing formation that it had appeared to be forming. A WTI move below $43.50 could herald a new leg down.
Is Europe At A Key Crossroad? – In Greece the per capita income is now lower than it was before they joined the Euro zone years ago. The same is true of Italy. The grand experiment is looking less grand each day.
Stratfor founder, George Friedman, opined on stresses on the Euro zone in a recent piece. Here is a bit:
There are then three drivers in Europe now. One is the desire to control borders — nominally to control Islamist terrorists but truthfully to limit the movement of all labor, Muslims included. Second, there is the empowerment of the nation-states in Europe by the European Central Bank, which is making its quantitative easing program run through national banks, which may only buy their own nation's debt. Third, there is the political base, which is dissolving under Europe's feet.
The question about Europe now is not whether it can retain its current form, but how radically that form will change. And the most daunting question is whether Europe, unable to maintain its union, will see a return of nationalism and its possible consequences. As I put it in Flashpoints:
The most important question in the world is whether conflict and war have actually been banished or whether this is merely an interlude, a seductive illusion. Europe is the single most prosperous region in the world. Its collective GDP is greater than that of the United States. It touches Asia, the Middle East and Africa. Another series of wars would change not only Europe, but the entire world.
To even speak of war in Europe would have been preposterous a few years ago, and to many, it is preposterous today. But Ukraine is very much a part of Europe, as was Yugoslavia. Europeans' confidence that all this is behind them, the sense of European exceptionalism, may well be correct. But as Europe's institutions disintegrate, it is not too early to ask what comes next. History rarely provides the answer you expect — and certainly not the answer you hope for.
Consensus – Oil will be closely watched to see if we're breaking down out of a base. That would not be a good thing. Will the ten year move closer to Barry Habib's target of 1.62%. Greece has calmed a bit this morning but the close is still hours away. Stick with the drill – stay wary, alert and very, very nimble.
***ALSO RELEASED: Billionaire Eric Sprott – Entities Wiped Out Overnight As Western Central Banks Near Total Surrender CLICK HERE.
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