War Drums Beat on Markets

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.


The latest soundtrack in the financial markets can best be described as the beating of war drums with Syria. Since tensions in that Middle East nation have escalated to the point where U.S. military action now is almost a certainty, the price of assets such as oil, gold, Treasury bonds and equities all have been materially affected.

Take oil, for example. The chart below shows that big spike higher in the iPath S&P GSCI Crude Oil TR Index ETN (OIL) to multi-year highs, as energy traders react to the potential of a supply constriction from the Middle East if the war in Syria morphs into a much more bellicose regional conflict.

OIL 082813

Meanwhile, traditional safe-haven assets such as gold and Treasury bonds both have been bid up as a result of the Syrian tensions. The charts here of the SPDR Gold Trust (GLD) and the iShares Barclays 20+ Year Treasury Bond (TLT) clearly show the flight to quality taking place in these two “risk off” trades.

GLD 082813

TLT-082813

As for equities, we see the Dow trading well below its 50-day moving average, as traders move to lock in gains made throughout most of what has been a great 2013 bull run.

So, now the question is — what next?

DIA-082813

As you likely know, for the past several weeks I’ve been warning you that we are entering the “risk season” for stocks. Just like in winter, when you get cold weather, snow and storms, you tend to see a huge amount of market volatility in August, September and October. September also happens to be the worst-performing month for stocks, at least from an historical perspective.

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Given the big gains we’ve seen in stocks in 2013, this risk season could be particularly bad for the bulls. Of course, if the selling does get ugly, it just might turn out to be the best thing for the markets. You see, stocks are way too overbought here, and even with the latest pullback off the August highs, I think stocks have plenty more selling ahead.

When that selling does take place, I think smart investors will be staring at one of the best new buying opportunities of the year. Of course, we are not there just yet, but now is the time to get your buy lists ready for the next discount on quality stocks.

What areas of the market should you pay the most attention to for new buying opportunities? To find out what I’m watching right now, I invite you to check out my Successful Investing advisory service today.

On Skunks and Publicity

“What kills a skunk is the publicity it gives itself.”

–Abraham Lincoln

There has been a lot of malodorous publicity out there lately. From politicians to pop stars to sports icons, the cultural stench wafting through the air is both heavy and annoying. Yet it’s also likely to be self-correcting, as Abraham Lincoln reminds us in this brilliant insight. Remember that the next time you get worked up about something you see on CNN, MTV or ESPN.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Making Money Alert readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Click here to ask Doug.

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To read my e-letter from last week, please click here. I also invite you to comment about my column in the space provided below.

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It was another tough week for stock markets around the globe, as the S&P 500 dipped 1.32%, while the MSCI Emerging Markets Index tumbled 2.94%. Only two positions in your Alpha Investor Letter portfolio eked out gains -- Visa Inc. (V) and last month's bet on biotechnology through the Market Vectors Biotech ETF (BBH), which was boosted by news of Amgen Inc.'s $10 billion bid for Onyx. One position, First Trust US IPO Index (FPX), es

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