Geopolitical Forecasting Through Technical Analysis: Is Turkey About to Destabilize the Middle East?

This post is due to seeing this headline. WSJ: Why Istanbul Should Be Called Catstantinople

I read it as catastrophe because I knew Turkey's currency was falling sharply. Then I pulled up the chart of the Turkey ETF.
If that is a head and shoulders, the target price is single digits.

A politician called for martial law yesterday. MHP leader calls for martial law in Turkey
As the escalation of violence in the country has raised a sense of insecurity among its citizens, Turkey’s nationalist party leader has called for a declaration of martial law.

“Under today’s conditions, as terror has reached its peak point, the National Security Council [MGK] should hold an emergency meeting,” said Nationalist Movement Party (MHP) leader Devlet Bahçeli, in a written statement late on Aug. 19.

His statement was released just hours after the Turkish Armed Forces (TSK) announced earlier on Aug. 19 that militants from the outlawed Kurdistan Workers’ Party (PKK) had killed eight soldiers with a roadside bomb in the southeastern Anatolian province of Siirt.

“In line with Article 122 of the constitution, it is obligatory to definitely secure a section of our country with martial law measures in a way that would include cities and towns [which have been a] scene to violence and horror,” Bahçeli said.

“Under today’s conditions and environment in Turkey, holding an election may light the fuse of a civil war. In this regard, the repetition of elections should definitely be reviewed,” he also said.
I don't know if they look at stock charts at the State Department or CIA. I know they look at maps though.

ISIS is in the region.

The Kurds are all along ISIS's border to the north.

ISIS and the Kurds are enemies because the Kurds inhibit ISIS' ability to expand, but Turkey is an enemy of both. Turkey Pays Former CIA Director and Lobbyists to Misrepresent Attacks on Kurds and ISIS
The Wall Street Journal reported on August 12 that a senior US military official accused Turkey of deceiving the American government by allowing its use of Incirlik airbase to attack ISIS, as a cover for President Erdogan's war on Kurdish fighters (PKK) in northern Iraq. So far, Turkey has carried out 300 air strikes against the PKK, and only three against ISIS! Erdogan's intent in punishing the Kurds is to gain the sympathy of Turkish voters in the next parliamentary elections, enabling his party to win an outright majority and establish an autocratic presidential theocracy.
I don't know the veracity of the claim, but it reflects real sentiment in the country.

To round out the picture, there's Greece. "Golden Dawn": Turkey is funding the creation of "Greater Albania"
"Turkey recently has been educating Albanian officers in its schools and at the same time provides Albania army military vehicles and other light and armored vehicles. The creation of Islam-Turkish Archery in the Balkans, part of which is' Greater Albania ', is already a fact. Albania is essentially a political and military base of Turkey. Turkey will continue to provide Albania with the weapons, which in a not too distant future will be used for actions against the Greek territory" reads the statement.
And there's no love lost over Cyprus.

I don't know enough about Turkey to say what can or cannot happen. I do know if that is a clean H&S break, it is forecasting a drop of more than 80%. There are plenty of economic reasons to forecast a drop in the Turkey ETF. Back in 2012 I posted: Turkey going down the tubes. The excerpt below is from a linked article.
Erdogan has the weirdest economic views of any serving head of government. He justified the credit bubble on religious grounds, pledging repeatedly to cut the "real" interest rate (the cost of interest minus the inflation rate) to zero.

"We aim to cut the real interest rate in the long run, so people will increase their incomes through working, not through interest," he said last April. "Eventually we aim to equalize the interest rate and inflation rate."

Erdoğan believes that this would fulfill the Islamic injunction against lending for interest; if the real interest rate is zero, he seems to think, the sharia ban on interest is fulfilled de facto. In order words, Turkey provided nearly free money to bank customers. Erdogan's program set in motion a series of perverse effects. One is a sharp fall in the exchange rate.
Earlier this year, Erdogan said lower interest rates lead to lower inflation. Reuters: Turkey's Erdogan says lower rates bring slower inflation, boost investment
"Let's look at where inflation was when interest rates fell ... If we look at when we attracted investment and the level of interest rates, you'll see this assessment," Erdogan said in comments broadcast live on TRT.

Forbes in 2014: Why The Worst Is Still Ahead For Turkey's Bubble Economy

Today in Reuters: Turkey's banks need to prepare for slower lending growth: ECB paper

Turkey enjoyed rapid economic growth of almost 9 percent in 2011, but the pace slowed to just 2.9 percent last year and economists see that sustained this year, missing the government's 4 percent target.

Growth may accelerate next year but only slightly and investment growth may remain muted due to lack of structural reforms, Europe's weak economy and violence across Turkey's borders in Syria and Iraq.

The study, which is not the official view of the European Central Bank, says Turkish banks are generally strong but their large government bond holdings expose them to the risk of sovereign debt shocks. A big increase in foreign currency loans to corporations is also a vulnerability, the authors said.

"The main challenge going forward will be to achieve a 'soft landing' as regards the pace of credit extension, both as regards the headline rate as well as in the specific segment of foreign exchange lending to the corporate sector," said the paper, which examined banks in potential European Union member countries.
All of which is to say, I can see the Turkey ETF (TUR) hitting single digits solely through currency depreciation and financial crisis. There's enough fuel there for it. However, geopolitical developments concern because they are likely to deteriorate along with the economy. If the chart is correct, economics and politics are going to get much worse for Turkey in the months ahead. Of course, the chart might reverse and the pattern may break, making a short of TUR a bad trade and a forecast of instability a wrong one. If it doesn't, Turkey may quickly become the new center of attention in the Middle East.

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