Market In Correction

Charts: The S&P 500 closed at 1043, down 2%. The market is in a correction.

Fundamentals: The Commerce Dept. reported that new home sales experienced the first decline since the rally started in March. The Home Buyers Tax Credit is effectively expired, the reason for the decline. Congress will probably extend the program. The new program will have less impact than the original but it will bolster housing for a few months and when it expires housing will take another dive and the debate will begin for a third extension. GMAC just got its 3rd bailout today. Failed stimulus and failed bailouts is the pattern of Japan in the 90s (not good).

Geopolitics: The Pak Army 3-pronged attack in S. Waziristan advanced on 2 prongs and stalled on 1 prong, killing 42 bad guys Tuesday with one good guy killed. It is possible that the bad guy body count is accurate but more good guys were killed than the Army is admitting. The Pak Army says that overall Taliban resistance is stiff. In the non-tribal areas of Pakistan the Taliban continues to inflict big damage through terror attacks.
In Somalia, Al-Shabab says that it is ready to attack Uganda. The Ugandan Army supplies most of the troops to the AU force fighting the bad guys in Mogadishu. The Ugandan government takes the threat seriously enough to start rounding up Somali nationals and refugees inside its borders. The war rages on in Mogadishu in a bloody stalemate.
Yemen and Somalia are only separated by a small body of water. If we look at a map and draw red circles around Afghanistan/Pakistan and Yemen/Somalia it appears that there are two combat zones in the Long War. The President of Yemen said as much today by calling on the Arab world to help the good guys in Somalia; he knows that his government is in grave danger if Al-Shabab takes complete control of Somalia. Now look at a map of the Mid-East’s proven oil reserves in relation to Yemen and Afghanistan and you will see why the long term danger is so great from these conflicts.
The big picture for the Long War revolves around Obama giving McChrystal the green-light on troops and strategy. This hinges on Healthcare reform passing. Healthcare is floundering as Senate Majority Leader Reid reintroduced the public option to his version of the package to bolster liberal support. This stripped support from Blue Dogs and Republicans.