Friday the markets rallied strongly on easing tensions and the Fed came in supporting the markets.
The idea is that the FED will try and stablize the market this week. The SMA 50 on the SP500 (1,950) has not be retaken so as of now the market is just creating a base.
It looks strangely familiar to the pullback in January/February – so we could be half way.
On the field:
Markets:
The highest source of stress is created on the US High Yield Credit Market. The advent of High Yield Bond ETF (highly tradable) created a distortion as the high yield bond market is actually not very liquid. So huge sales in High Yield Bond ETF could create issues. It could be argued that it should already have happened – I tend to agree.
Geopolitics
-Ukraine: Russia pulled back the troops, but the fighting goes on (actually the Pro-Russia force asked for an humanitarian truce, but Ukrainian government asks for total surrender).
Russia does not want to intervene. It is already convinced that we are in Cold War 2.0, but it is not yet prepared for a winnable confrontation with the West. US is trying to lure it in, but it won’t take the bait.
An advisor to Putin (Mr. Glazyev) statedd in an interview that the aim for Russia is to de-dollarize the world trade and increase the energy price + shift the trade partner from Europe to Asia/South America so creating a terrible price to pay for the European Union (and NATO) to sustain the US war on Russia.
-Iraq
Islamic State finally succeeded to upset everybody and now we see the US re entering the Iraq with some few initial victories due to the immense air fire power.
Notwithstanding the speeches. the are some Special Forces ground troops (From Daily Mirror – UK) which is inevitable as the smart bombs need guidance.
What Islamic State will do next will be interesting. They could flood Baghdad if reports that they capture Mosul’s dam. They already called for act of terrorism against US interest – but Islamic State is more like an army and the terrorism tradecraft is pretty different. Unless they have some old Al Qaeda cells it will be hard for them to carry out something meaningful like a full on terror operation.
There are reports (unconfirmed) of a coup in Baghdad to oust current PM Al-Maliki.
So, situation improving but very fluid
investorpolitico 