Charts: The S&P 500 closed at 1047, up .1%. First resistance is at 1052, the 50-day moving average. Next resistance is 1056, a key retracement level of the correction. Above that resistance is at 1060. Support is at 1040. The market is in a correction. The market made a bearish late day reversal and failed to retake the 50-day line (not good).
Fundamentals: In its big policy statement the Fed said the economy is weak and rates will be low for a long time. America’s ISM service sector index came in worse than expected, registering a slight decline after a series of gains. An anemic American recovery coupled to strength in Asia pushes the dollar down and fuels the dollar carry trade, good for bubble-mentality and bad for fundamentals. Professor Roubinin gave a speech about the asset bubble today. He said, “When it unravels, it’s going to get ugly. Everyone shorting dollars will try to get out of those positions at the same time, and we’d have a stampede.”
Geopolitics: A spokesman for the Pakistani Taliban told reporters that the Taliban is making a tactical retreat in S. Waziristan because it is unable to fight toe-to-toe with the mighty Pak Army in conventional warfare. The spokesman said that the bad guys will complete a fighting retreat and then regroup for an extended guerilla campaign which will hit targets throughout Pakistan. Public opinion polls in Pakistan show that 51% of the population supports the war even though civilians are getting killed every week in large terror attacks (courageous).
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