War Drums Beat on Markets

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.

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.

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?

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.

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.