It's usually the thing you're NOT thinking about that catches you most by surprise. Of course the previous statement is a tautology. What we're trying to say is that your ultimate enemy in a bear market is complacency. In order to avoid unnecessary losses, you have to force yourself to think about the things you're not thinking about!
What is it everyone has forgotten or become complacent about? Well, we would never presume to speak for everyone. Speaking for ourselves, we realised this morning how complacent we've become about the fact there's a war raging in the Middle East between Saudi Arabia and Iran. And it's getting worse by the day.
You probably won't see the escalating civil war in Syria described as a war between Iran and Saudi Arabia, but that's exactly what it is. This is a repeat of the same scenario that's played out across the Arab world since the Arab Spring began when Mohamed Bouazizi set himself on fire in Tunisia in December 2010. Authoritarian regimes (previously supported by the US and European allies) have melted away and left a power vacuum contested by Sunnis, Shias and other groups.
Five years ago, any hint of civil insurrection in the Arab world was enough to send the oil price up. The 'geopolitical' premium in oil was a huge factor in its run to US$145 in 2008. Then you had a combination of the financial crisis and the huge drop off in growth. Oil prices went into free fall.
They've recovered some since then, as the chart below shows. In fact, the recent price action caught our attention. The spot price of Brent Crude is up 15% since late June. The chart shows Brent consistently oversold for the last month, with the Relative Strength Index (RSI) under 30. And for what it's worth, the daily price has crossed above the 50-day moving average, which is usually a bullish sign.
We generally leave the technical analysis to Murray, but all we'd like to point out here is that the oil price is moving again. And it can't be moving because of bullish growth forecasts from the world's major economies. Could the rise in Brent Crude be the first signal that the simmering war between Saudi Arabia and Iran is about to boil over in Syria? (more)
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