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"The harvest in the Mother of Battles has succeeded...
the greater harvest and its yield
will be in the time to come..."
(comment by Saddam Hussein following the Gulf War)
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"The Arab countries should be asking themselves,
'Who will fire the 40th missile against Israel?'"
-Saddam Hussein
(From a speech he gave on the fourth anniversary
of the start of the Gulf War.)
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As I have noted time and time again in previous posts, when the DJIA reverses from psychologically important thousand marks, bad things tend to happen.
In mid-July of 1990, the DJIA closed at a then record high of 2999.75 two days in a row and then reversed course. On the second day that the DJIA closed within a quarter point of 3000, July 17th, 1990, Iraqi leader Saddam Hussein gave a speech in which he issued a veiled threat against Kuwait. Within a week, the DJIA fell five percent from the psychologically important 3000 mark. At the time of this shift in sentiment, Iraq started massing troops on its border with Kuwait, although the drop in stock prices was not attributed to developments in the Persian Gulf at the time. In early-August of 1990, Iraq actually invaded Kuwait and stock prices plunged nearly 20 percent by October of that year.
For stock market technical analysts, what occurred in 1990 was remarkable. A significant reversal in stock prices was fairly predictable in that the DJIA reached a psychologically important thousand mark, investor optimism was at a relative extreme, and the record peak in the Dow Jones Industrials was not met by all-time highs in the Dow Jones Transportation and Utility indexes (such non-confirmations are often followed by Dow Theory sell signals; the last such sell signal was the one in 1990). Furthermore, stock prices rose in an Elliott Wave diagonal triangle pattern into the top at 3000 in 1990- a pattern that indicates a sharp price reversal from the associated peak (a similar patter is observed into the December 1997 peak in the S&P500).
Thus, going into the top at 3000 in July of 1990, there were tell-tale technical indications that stock prices would fall sharply in the weeks and months ahead, but there was no way to know what would *cause* a market correction. In other words, one could anticipate that investor's expectations were about to be upset, but one didn't know where that upset would come from. Enter Saddam Hussein, Iraq's unexpected invasion of Kuwait and an oil-shock that pushed the economy into recession and stock prices plunging...
What occurred in 1990 with a market top at Dow 3000 was not some sort of unique, singular coincidence. The pattern may be observed on many other occassions in U.S. stock market history. In 1973, the DJIA reversed from 1000 and soon thereafter, when the DJIA retested 1000 in October of that year, the Arabs launched a Yom Kippur surprise attack against Israel that eventually led to an OPEC oil embargo against the West, a major oil-shock and economic recession, and a 40 percent collapse in stock prices over the course of a year. Likewise, in January of 1994 and March of this year, the Dow peaked around 4000 and 7000, respectively. Soon AFTER the DJIA reversed from these psychologically important thousands marks, the Fed hiked interest rates and stock prices fell by around 10 percent.
With Dow 8000, we are seeing this DJIA thousand mark phenomenon repeat once again. In August, the DJIA peaked about four percent above the 8000 mark, and then the stock market fell back below 8000 to the 7600 level into September. The Dow climbed back slightly above 8000 into mid-October, dropped below the psychologically important mark briefly to 7800 and then bounced back above 8000 once again into October 22nd, 1997. The DJIA then reversed from 8000.
One should note that, while the Dow Industrials failed to reach a new record high in October 1997, the Transports did such that a Dow Theory non-confirmation occurred. If the DJIA now drops below 7600 and the Transports fall below 2865, then the first Dow Theory sell signal since 1990 and Iraq's invasion of Kuwait will occur.
Following the low at Dow 7000 on October 27th, stock prices rebounded to above 8000 in early-December of 1997. The Dow then dipped back below 8000 and retested the mark two more times but failed to get above the seemingly magical psychological barrier. Last week, the first full week of trading in 1998, the DJIA tested 8000 on Monday and then stock prices started to slip sharply and ended the week down nearly five percent. On Friday the DJIA closed below the key Dow Theory level of 7600. When traded resumed today, the U.S. stock market fluctuated signficantly and closed up on the day with the Dow Industrials reaching back above 7600.
There is substantial reason to believe that what is now going to happen is a dramatic upset of investor expectations and major stock market crash. First off, this is so because, in the context of stock market technical analysis, the DJIA is entering a "third wave" down following the wave one low reached in October 1997. In the context of Elliott Wave analysis, this is the crash wave and is when the all-out selling panics occurred in 1929 and 1987. Such a crash will particularly occur if and when the Dow Industrials fall below 7600 and the Dow Transports fall below 2865 such that a Dow Theory sell signal occurs for the first time since the last major correction in stock prices after Iraq invaded Kuwait in 1990. Lastly, a crash in Wall Street's expectations and U.S. stock prices might now occur because Saddam appears to be provoking a new fight with the West. I believe this fight is leading up to the use weapons of mass destruction against Israel, and possibly America, such that a major war is set-off in the Middle East that could eventually trigger world war three. This, at least, appears to be what I foresaw in February of 1991 when I had a vision of a chemical SCUD missile attack against Israel while contemplating what might eventually cause the so-called "Grand Supercycle crash".
As you will see by checking current headlines, just as the stock market is starting to head down sharply following a failure at Dow 8000 last week, Saddam Hussein is but again in the news as the confrontation that occurred late last year is reviving. This means that my warning of so long, i.e., Dow 4....5....6....7 and now 8000 & "Saddam's Revenge", may be about to prove true. What is Saddam's Revenge? See my related articles-
Read:
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"Iraq Provokes Crisis, Vows to Bar Inspectors"
Monday January 12 6:50 PM EST
By Michael Georgy
BAGHDAD, Iraq (Reuters) - Iraq touched off a fresh crisis with
the United States and United Nations Monday by ordering a halt to
weapons inspections by a U.N. team led by an American it said was
a spy.
The Iraqi threat to halt the team's work starting Tuesday drew an
angry response from President Clinton. The United Nations served
notice the team would go ahead with its work on Tuesday.
"Iraq has decided to stop the work of the inspection team headed
by the American Scott Ritter and to withdraw permission for him
to undertake any activities on its territory, starting from
Tuesday," the official Iraqi news agency INA said.
The Iraqi ambassador to the United Nations, Nizar Hamdoon, said
in New York that Iraq had no plans to expel Ritter but could not
accept an inspection team drawn almost entirely from America and
its closest big power ally, Britain.
The move was attacked by the United States, leader of the
international alliance that drove Iraq from Kuwait in 1991 and
imposed cease-fire terms barring Iraq from owning nuclear,
chemical or germ warfare weapons and long-range missiles.
Clinton said Iraq could not decide who inspected its weapons of
mass destruction and he expected the U.N. Security Council to
take strong action if it barred an American from U.N. teams.
"(Iraqi President) Saddam Hussein shouldn't be able to pick and
choose who does this work," Clinton told reporters. "If they are
denied their right to do their job tomorrow then I expect the
United Nations Security Council to take strong and appropriate
action."
The United States in November massed some 30 warships and more
than 250 fighter planes and bombers in the region after Iraq
expelled U.S. members of U.N. arms inspection teams.
A three-week standoff ended only after Russia smoothed over the
dispute by securing the return of the Americans, along with other
inspectors. Russia promised to work for U.N. sanctions against
Iraq to be eased.
Last week, the United States said it would keep the force,
including two aircraft carriers, poised near Iraq as long as Iraq
refused to comply fully with U.N. arms sanctions.
Clinton Monday did not discuss the possibility of using force to
compel Iraq to allow the teams to work unhampered, but other U.S.
officials pointedly noted Clinton never ruled out military
action.
Iraq, in a statement released by its official news agency INA,
said it would stop work by Ritter's team and withdraw permission
for him to undertake any activities on its territory from
Tuesday.
"If they are denied the right to do their job tomorrow, then I
expect the United Nations Security Council to take strong and
appropriate action," Clinton shot back.
"If Saddam Hussein does this, it is a clear and serious violation
of the United Nations Security Council resolution," he said.
Clinton said the United States had nothing to do with the
selection of Ritter's team, which included nine Americans, five
Britons, one Russian and one Australian. He said they were chosen
based on technical expertise and Ritter's group was part of a
wider team of 43 inspectors from 16 countries.
Other White House officials held out the hope Iraq might not
carry through on its decision and hinted the United States could
resort to force. They also denied Ritter was a spy.
Britain condemned Iraq's decision, saying it showed Iraq's
contempt for the international community's will.
U.N. weapons chief Richard Butler in a letter to the U.N.
Security Council said he would tell Ritter's team to start work
as normal Tuesday in line with council decisions that Iraq should
cooperate and could not dictate composition of teams.
"I propose to instruct the chief inspector to seek to proceed
with his business tomorrow ... and if possible, until the planned
program of inspections is completed," he said.
Butler, head of the U.N. Special Commission (UNSCOM) in charge of
neutralizing Iraq's weapons of mass destruction, said Ritter
arrived in Iraq with 15 inspectors but the overall team he led
also drew on staff resident in Baghdad and others.
French Foreign Minister Hubert Vedrine said in Amman, Jordan,
after talks with King Hussein that France's position was based on
the implementation of the Security Council resolutions which
specify unconditional access for UNSCOM.
Riyad al-Qaysi, undersecretary at Iraq's foreign ministry,
criticized the American and U.N. position that Iraq had no right
to influence the makeup of the inspection teams.
"This position is a unilateral American position," he told
Qatar's al-Jazira television, stressing that UNSCOM should be
directed from the Security Council and not the United States.
U.N. Secretary-General Kofi Annan asked Iraq not to make any rash
action before Butler arrived in Baghdad on Jan. 19.
"My advice to them would be to wait and discuss these issues with
him and not take any precipitous action," he said.
Oil prices, which hit a 45-month low of $15.10 a barrel early
Monday, rose 15 cents to $15.50 immediately after the Iraqi
announcement.
INA said work by the U.N. team would remain suspended until it
reflected "balanced participation" of the five permanent members
of the U.N. Security Council. The permanent members are China,
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"Clinton repeats threat of military action against Iraq"
By JIM ABRAMS, The Associated Press
WASHINGTON (November 9, 1997 4:35 p.m. EST) -- The United States
will not tolerate attacks by Saddam Hussein when American U-2 spy
planes resume U.N. surveillance flights Monday over Iraq,
President Clinton said Sunday.
Senate Majority Leader Trent Lott said the latest crisis with
Iraqi president Saddam could be "a very telling moment in the
administration." He stressed that Clinton would have Congress'
full support if he were to order bombing runs against Iraq.
The crisis could come to a head Monday when the U-2s flying under
the U.N. flag are to return to the air despite Iraqi threats
against them. Tariq Aziz, Iraq's deputy foreign minister, who was
en route to New York to carry Iraq's message to the United
Nations, told CNN Saturday that Iraq's anti-aircraft sites were
in a "standby mode" and would fire on the spy planes.
Iraq also continues to turn back U.N. weapons inspection teams,
insisting that it will not allow American participation in the
teams.
Clinton, in an interview with NBC's "Meet the Press" taped
Saturday and aired Sunday, reiterated it would be a "big mistake"
for Saddam to attack the U-2 planes. "We will not tolerate his
efforts to murder our pilots acting on behalf of the United
Nations, under United Nations Security Council resolutions," the
president said.
Clinton and other U.S. officials have not said specifically that
an attack on the plane would provoke a military response. But
Clinton warned again that "Saddam Hussein needs to understand
that this is a serious business."
Secretary of State Madeleine Albright, asked on CBS' "Face the
Nation" whether the United States would go it alone against Iraq
if other U.N. nations balked at military action, said: "People
know that we will do what is necessary. I think we are going to
work on having international accord, but we cannot afford to have
anyone doubt our resolve."
She said that while there was some disagreement among the allies
on the sanctions imposed on Iraq after the 1991 Gulf War, "there
is remarkable unity in terms of saying we must reverse this
decision" to bar Americans from the inspection teams.
Lott, R-Miss., on "Fox News Sunday," said Congress would
immediately give bipartisan support to any military action. "I do
think they've got to be better than they were last time," he
said. "It can't be a pinprick that actually left Saddam Hussein
stronger after that very small slap."
In September last year the United States launched Tomahawk cruise
missiles against military targets in several Iraqi cities and an
air base to punish Saddam for moving troops into Kurdish-
controlled areas in northern Iraq.
Albright said Saddam may have sparked the latest crisis because
inspection teams were close to discovering secret weapons caches.
She said a particular worry was Iraq's biological weapons, which
Saddam "lied about."
Albright said Saddam is "just a congenital liar, and we have to
remember that. He is the problem."
U.S. law forbids attempts to assassinate foreign leaders. It is
legal, in a state of war, to go after an enemy commander in
chief.
Albright would not comment on specific action against Saddam. "He
is the commander in chief," she said, but added: "None of us has
ever said we want him alive or dead."
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"Chronology of key events in Persian Gulf War and aftermath"
(November 9, 1997 4:35 p.m. EST) - Key dates:
1990
Aug. 2 -- Iraq invades Kuwait.
Aug. 6 -- United Nations imposes sanctions on Iraq, which are
still in force.
1991
Jan. 17 -- U.S.-led coalition launches air war against Iraq.
Feb. 26 -- Allied troops take control of Kuwait.
Feb. 28 -- Cease-fire announced.
March 2 -- Shiite Muslims in southern Iraq and Kurds in the north
rebel, and Iraqi army crushes both revolts.
1992
Aug. 27 -- A "no-fly" zone is imposed over southern Iraq to stop
air attacks on Shiite Muslim rebels. United States and some
allies begin air patrols, which continue.
1993
Jan. 7 -- After Baghdad refuses to remove missiles that U.S. says
it has moved into southern Iraq, allied warplanes and warships
attack missile sites and a nuclear facility near Baghdad.
June 27 -- U.S. warships fire 24 cruise missiles at intelligence
headquarters in Baghdad in retaliation for plot to assassinate
former President George Bush. By Iraqi count, eight die.
1994
Oct. 7 -- Iraqi troops move toward Kuwait, then pull back when
U.S. dispatches carrier group, 54,000 troops and warplanes.
1996
Aug. 31 -- Saddam Hussein sends Iraqi forces into northern Iraq,
capturing a key city inside the Kurdish "safe haven" protected by
U.S.-led forces.
Sept. 3-4 -- U.S. ships and airplanes fire scores of cruise
missiles at military targets in a move to punish the Iraq
military and discourage it from following Hussein. President
Clinton extends the southern no-fly zone to the suburbs of
Baghdad.
Nov. 25 -- Iraq announces "full agreement" with the United
Nations on implementing the oil-for-food deal.
Dec. 9 -- U.N. Secretary-General Boutros Boutros-Ghali gives
final OK allowing Iraq to make limited oil sales.
1997
June 21 -- Clinton and Russian President Boris Yeltsin agree to
consider tougher sanctions against Iraq unless U.N. weapons
inspectors certify in October that Baghdad is fully cooperating.
Oct. 7 -- U.N. weapons inspectors report Iraq still refuses to
disclose full details of its banned weapons program and is
imposing new restrictions on inspections.
Oct. 23 -- The U.N. Security Council threatens Iraq with trade
ban unless it cooperates with inspectors. Russia, China, France,
Kenya, Egypt abstain in the voting.
Oct. 29 -- Baghdad bars Americans from participating in U.N.
weapons inspections in Iraq.
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