Charts And Geopolitics Are Weak

Charts: The S&P 500 closed at 995, down .33%. The broad index faded into the closing bell, which is bearish action. XLF (financial index) is down 5% in four days. The charts are weak and the possibility of a correction looms.

Fundamentals: Friday is the government’s big jobs report. In a normal recession at this point in the cycle investors would be pretty much ignoring jobs news because they expect it to get worse for about a year even as the economy grows. This time it is different because the job losses are so great they might tear the recovery apart unless they show something at least resembling stabilization. Forecasters are calling for unemployment to peak at 10%. If it peaks much higher there will be trouble.

Geopolitics: In Somalia, Ethiopian troops moved into a couple Somali towns along the border between the two countries several days ago and did some good, blasting out bad guys. Yesterday the Ethiopian Army withdrew from the Somali border region, mission accomplished. As soon as the good guys were gone, Al-Shabab launched a new offensive against government forces in Mogadishu (the capital city). Five thousand African Union troops as well as Somali government troops are now battling the bad guys and holding their own. There are hints of CIA involvement in all this action; for instance good guys from certain tribes and religious sects are toting brand new Chinese made AK 47s, where we would expect them to carry old used ones if they weren’t being helped by the CIA. Considering all this you can see why the US Attorney General attacking the CIA is so harmful.
In Pakistan, the Paki Army is back on the offensive, sweeping into bad guy country in a massive show of force. 110 bad guys have surrendered and about 50 have been killed after the bad guy’s string of victories recently that included two attacks on NATO supply lines and killing 15 police cadets. Today the bad guys tried and failed to assassinate the government’s top religious advisor in Islamabad. In Afghanistan, a Taliban suicide bomber killed the Afghani government’s Deputy Chief of Intelligence and 22 other good guys. The Afghani Taliban is flexing its muscles.