Overall Picture Is Bullish

Charts: The S&P 500 closed at 1071, up .56%. The market fought psychological resistance at 1070 all afternoon before proving victorious. Technical resistance of 1073 is the next battle. Uptrend intact.

Fundamentals: The back-to-school shopping season was a bit better than forecast. US weekly jobless claims also came in better yesterday, although the most recent monthly report was bad. Canada reports that its jobs picture is getting much better; a sign that the global recovery is uneven but there is in fact a recovery that is spreading. And the pattern of good top line and bottom line earning beats is intact. An earnings pattern like this is usually established after a week or so has gone by. If that happens, the odds of the rally continuing through the entire season are good.

Geopolitics: Last night the White House made noise about actually liking the Biden Plan. I might have misinterpreted the meaning of the US Army’s rush to implement the Gates Plan without White House approval. Rather than good news it might be a sign that the Pentagon is trying to preempt a bad call by the administration. And yesterday I may have overstated how hard the Pentagon can sometimes push the White House around; usually the generals and admirals have to salute the President and say, “Yes sir!” to whatever he says. This all boils down to the Biden Plan still being very much alive (scary). If Obama really wants to push the B Plan down the Pentagon’s throat he has the ability to do so. We are trying to predict the actions of a single man, the President, an inherently impossible task.
Obama might be seduced by the sweet siren song of the B Plan. And like the mythic Greek sailors that listened to the original siren song, a disaster looms today in these treacherous lyrics: “America has no need to patrol the streets of Kandahar and risk getting hit by IEDs. There is no need to teach Afghan soldiers to patrol and fight under combat conditions. Afghani soldiers can be taught in a safe classroom with chalk and blackboards, and then sent out into combat all by themselves without American embedded trainers and troops at their side. American soldiers can stay safely hidden in fortified bases, never get hurt, and still win the war.” Liberals love this stupid song, so anything is possible.
I still don’t think the Biden Plan will be implemented. To actually push it down the Pentagon’s throat the President would have to fire McChrystal and replace him with some tame general that we’ve never heard of. Seems unlikely. Is Obama simply putting on the biggest snow-job ever to pacify his liberal base?
Meanwhile, the Paki Army killed 17 bad guys Friday. This reminds us that the war isn’t really being fought in Washington D.C. The Paki Army is stacking up dead bad guys like cord wood in the real war. The invasion of South Waziristan appears to be on track.