Army + Stock Exchange = Good Guy

Charts: The S&P 500 closed at 1093, flat on the day, up 2.2% on the week. The volume on Monday’s big up day was high enough to turn the rally attempt into a genuine rally, signaling the start of the fourth rally leg within the bull market that started in March. The volume pattern is now bullish within the 2-week old rally leg. But only 4.66 billion shares traded on the NYSE Monday compared to the ‘09 average of 5.78 billion. And during the recent correction the average volume on down days was greater than Monday’s total. Volume is becoming a technical issue as the bull matures. As noted yesterday, stock market volume has to be low to allow enough funds to flow into the nearly insatiable government bond market and it’s working, we continue to see stocks and bonds rally simultaneously. Like a trapeze artist the rally and recovery are wobbling along.

Fundamentals: The leaders of the G20 met over the weekend and pledged to keep deficit –fueled fiscal stimulus measures at current levels until a full recovery is under way. The bull market so far has been liquidity fueled and this pledge insures hyper-liquidity for the foreseeable future, inflating financial assets and commodities through the dollar carry trade, this is not necessarily good news fundamentally. But economic data from Germany and China keep surprising to the upside. The global recovery is uneven. America is limping along and Latvia announced another shocking 18% collapse in GDP.

Geopolitics: It’s very simple to tell the good guys from the bad guys among the armies/militias fighting in the Long War. All armies/militias connected to stock exchanges are good and the ones not connected to stock exchanges are bad. The Taliban, Al-Qaeda, and Al-Shabab do not have stock exchanges and are bad. NATO countries, Afghanistan, Pak, Kenya, the African Union, Ethiopia, Iraq, S. Korea, and Somalia have stock exchanges and are good. The Somali stock market is up the most of this group, 500% in the last 3 months. Even though the leading Somali stocks are publically traded sea pirate companies, the country has a corporate structure and some legitimate companies are flourishing. Among the good guy national armies only Yemen does not have a stock exchange. This is a massive weakness in our global alliance. Fortunately, Dubai is working night and day to open an exchange in Yemen and by early 2010 we will be able to buy and sell Yemeni shares. Dubai, therefore, is striking a blow for the good guys through financial engineering.
In Afghanistan, The Afghan Army has killed 130 bad guys in a major battle in the northern part of the country. With NATO air support and help from US Special Forces, the Afghan Army did the lion’s share of the fighting and suffered no combat deaths.
Iran and Saudi Arabia are trading diplomatic threats over the Saudi military operations in Yemen. The Saudi government says it will stop attacking the northern rebels once they retreat 10 kilometers inside Yemen. Saudi jets are still pounding the bad guys at present.