Brent Crude rallied off support at $99/$100 per barrel, headed for a test of the upper trend channel. 63-Day Twiggs Momentum above its descending trendline warns that the down-trend is weakening. Breakout above the upper channel would test the 2011 high of $125/barrel.
CRB Commodities Index similarly rallied off support at 300. 63-Day Twiggs Momentum is still declining and failure to reach the upper trend channel (on the price chart) would warn of an accelerating down-trend.
Your analysis of the banking crisis and TBTF is, as usual, concise and perceptive. But you are leaving out one option: Forcing oil suppliers to reduce oil price significantly, as was done in Golf 1, and almost done in Gulf 2. Europe just did Libya. Will the US do Iran? This is not an off-the-wall idea as it may sound. When empires are forced to tighten their belts, their first reaction is to force their opponents to tighten theirs. When Rome was bankrupt it did Gaul. When Britain was bankrupt after the Napoleonic wars, it did India. The US, after 91′ junk bonds, did Gulf 1. After 2003’s Dot Coms, it did Gulf 2. Will it now do Iran? If it does, and oil falls to, say, $60/barrel, the savings of 500 bil a year will create the biggest bull market we ever saw. It will also create a mini depression in Saudi Arabia, Iran, and Russia. But they don’t vote here, do they?
The above is not prescriptive, just descriptive. I.e.: It is not a recommendation for what ought to happen, just analysis of what must happen. When you turn an indebted company around, if you can’t fire employees or stiff the bankers, and shareholders won’t let you print too much new paper, the only ones left to stiff are the suppliers.
Most analysts are kind hearted, honest civilians. But that’s not how empires work. They do what they must, and justify it later. If the above is correct, we’ll have one more market decline, leading into a war, then the most astonishing market rebound most can remember.
JE