Risk Factors and the Short Wave

The increasing gamma risk should have affected the short wave indicators significantly.

Iran can very significantly disrupt the supply of oil by intimidation in the Persian Gulf region. The increasing gamma risk with a very high probability will keep fuel prices under support pressure. The support does not have to be anything but an aggravation and intimidation factor, and that will affect the short-term trend, keeping the economy in a deflationary tendency.

Deflationary risk in high probability supports a continued accumulation phase of the business cycle. The cash accumulated from cost reduction revenues (unemployment) will be used for mergers and acquisitions, providing some support for equities. The short-term trend will not reflect the gamma risk and will be susceptible to unexpected reversal of investor sentiment from the big market movers.

The geo-political gamma risk conveniently provides an excuse for continuing the accumulation phase of the business cycle while the government engages in expansionist, distribution-phase politics. The value being provided by government will be consolidated by the big financials engaged in activity that is emblematic of "too big to fail." That will increase the earnings of financials while depreciating the fundamental value of the distribution--economic growth, which supports the value of the dollar and reduces the incentive for gamma-risk support of oil prices.

The antinomy of inflationary/deflationary pressure creates havoc for short-wave analytics with the predictors being squarely determined by the big commanders of market movements. The big movers rely on the short-wave indicators to falsely signal a trend to be commanded in reversal, but with the good reason, the excuse, of the gamma risk.

Not including the gamma risk is a critical error that keeps small investors following rather than predicting probable trends. Rather than predicting sentiment, the indicators cause it. Keeping the accumulation phase of the cycle alive functions, then, as a means of consolidating the plurality of value that makes for free-market economics and "cures" the problem of "too big to fail."