Charts: The S&P 500 closed at 1080, down 1.2%. The Dow is under 10,000. The broad index is hanging onto the key support level of 1080 by the skin of its teeth. Volume patterns have been bearish for two weeks. The uptrend is in trouble.
Fundamentals: September existing home sales came in very strong but analysts attributed this to a final surge in 1st time home buyer tax credit buyers, this program is effectively expired now. Congress would like to extend the home buyer giveaway but credit markets are beginning to exert discipline on US deficit spending, plus the program was riddled with fraud, so it might not get extended. The dollar has popped up this week on safe haven buying which is hurting commodities and stocks. The dollar stabilizing, oil going down, and credit markets disciplining Congress are all fundamentally good news but bad news for the asset bubble. As I’ve been saying, much of the market’s gains have been based on bubble-type asset inflation. Consider: consumer stocks have risen in exact tandem with the price of oil. But oil and consumer stocks should be natural enemies like cats and dogs, moving in opposite directions.
Geopolitics: In Pakistan, in S. Waziristan, the Army’s multi-pronged advance is stalled on all points of attack and the Pak Air Force is ramping up helicopter gunship and F-16 sorties while the Army’s artillery pounds away. The Army says that all civilians are out of harm’s way. Whether this is true or not doesn’t matter in a military sense. If the Army and Air Force are willing to carpet every square inch of enemy territory with artillery shells and bombs, then they can kill all the bad guys given time, and it is irrelevant how many civilians are eventually pulled out of the rubble.
The strategic village of Kotkai is still under Taliban control and the Army is settling into a siege there and around other key Taliban towns. Fighting is occurring in wooded terrain, underground, and in mountains. 24 bad guys were killed and 4 good guys today in S. Waziristan. In other tribal regions, 34 bad guys were killed, and an unknown number of good guys. Fighting is unexpectedly heavy throughout bad guy territory, not just in S. Waziristan.
The Taliban assassinated a Pak Army general in Islamabad. This incident grabbed the biggest headlines in global financial journals. The war in Pakistan isn’t going as well as investors expected as indicated by a big drop in the Karachi Exchange and some of the recent overall global market weakness, but the good guys are striking straight at the heart of darkness, the epicenter of all evil, and the beast isn’t going to die without a great struggle. Investors don’t want to hear this. Also, when and if the beast does die in S. Waziristan, then the whack-a-mole effect will cause an increased Islamic flare-up elsewhere such as Yemen or Somalia. Investors might not like that either. Yemen produced 108 million barrels of oil last year. Investors won’t like the beast getting close to Mid-East oil fields. Finally, Obama dithering on McChrystal’s troop request isn’t helping.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment