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Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Wednesday, February 23, 2011

Stock Market, Oil Price & Libya

Stock Market
By my charts, the SPX has fallen to trend support after breaking below the important 10 and 25
day m/a's. The market is starting to roll over, but it will take several days to get full confirmation.
Since NYMEX oil hit resitance today at $100 after a fast $12 bl. run up over the past five days,
we'll need to watch the pits tomorrow to see whether this panicky upswing in crude can break
out and perhaps lead to a more substantial breakdown of the stock market. $SPX chart.

Oil Price
The oil price has trended steadily higher since touching $70 bl. in May, 2010. It had been
observing a tight trend channel since then. The recent sprint up over the past few days represents
the first little piece of drama we have seen in a while. So, there is a spare capacity uncertainty
premium which has entered the market and the speculative handicapping could carry the oil price
higher in the short run even though there is no tangible evidence yet that global oil output will
be adversely affected by developments to date in N. Africa and Bahrain. Since the boyz are
talking their books, you need to watch the actual action at the wellheads carefully to make sure
you can x-out the magical thinking that is popping up.

Libya
Qaddafi is pulling his loyal troops and mercenaries into Tripoli. So long as the rebels block
roads east and west out of town, it is a death trap. What may be needed now is not another
grand rally up in the Green Square but a concerted military strike into Tripoli by the rebels
before Qaddafi can set up defensive perimeters. Since it is hard to say whether the rebels
and troops who have defected over to their side are well enough organized and armed to
lay siege to Qaddafi's HQ, there could be a stand-off ahead. Maybe the residents of Tripoli
can mass enough to chase the bad guys with a minimum of bloodshed, but the situation is
fast turning into a military one. It might not be a bad thing if NATO intelligence got in there
on the ground if they are not there already. There could be a lot of innocent lives at stake
if there are no appropriate limited force strike capabilities at hand.

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