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The 'Mideast indicator' is starting to bubble again.  Peak at hand? There was a poignant chart that you once published showing the incidents against the stock market. Ever since then, I really take notice to anything that goes on over there.
-- Eugene Fina

You can find the original chart by clicking on the appropriate link in the Socio Times entry of July 17, 2006. That entry illustrates, however, that you have to be a little careful because Mideast tension also tends to persist through bear markets and escalate when the market is nearing a low. In retrospect, that appears to have been the case last summer when Israel invaded Lebanon as the markets were approaching a bottom. But as we said last July, on a long-term basis, mood is changing course. Just look at the difference between the current environment and that of 1990s and 2000 when Arabs and Isreali were eliminating barriers and signing a string of peace agreements. The last one at which all of the prior agreements were very nearly consummated came at Camp David in July 2000, which was a few months after the all-time high in the NASDAQ and S&P.  At this point, a giant wall continues to wind its way higher in Gaza and the West Bank. In some places its 36 feet high and topped with razor wire. When complete, it will separate Jews from Arabs across 400 miles, a distance that is four times longer than the Berlin Wall. Elliott Wave has long maintained that fences go up as a response to a bearish desire for separation and control. As we said last summer, “Mood is continuing the reversal that began in 2000.”

The latest developments covered at left by Time are probably only the starting point for further agitation as stocks clearly aren’t bottoming. The rally from last summer’s lows helped quell the violence as Israel exited Lebanon. In November, as the Dow pushed to a new all-time high amidst some of the strongest breadth and momentum of the whole advance, “a truce was signed by militant Palestinian organizations and Israel.” The cease fire ended with several rocket volleys last month. The break down in unity within Palestinian ranks and the threat of civil war represents a whole new dimension, one that  fits perfectly with our expectations for all kinds of factionalism in the next phase of the bear market. As the Cultural Trends section of the April EWFF noted it’s important to keep in mind that bear markets “break things apart. This is a simple but important consequence, one that can be highly effective in anticipating important social transformations. With respect to the Middle East, for instance, some worry about the potential of a unified Arab front, but no such movement is likely to grab hold in the early part of a global bear market. Current fears, for instance, focus on Iran’s rising might as the ‘super power’ of the Middle East. But notice Iran’s recent dispute with Russia for non-payment in its nuclear development program. It’s hard to conquer the world when things are crumbling all around.” For those more deeply ensconsed in the bear market, the focus falls to the simple matter of survival. The way people tend to do it at such times, is to rely on smaller and smaller social units, thus the collapse from a nearly free nation to a collection of tribes and gangs.