Nancy Pelosi: Public Enemy # 1

Charts: The S&P 500 closed at 1106, up .4%. Small caps outperformed large caps, good leadership. The Nasdaq, however, should also be leading and it is not. 2200 has become a very serious resistance level for the Nasdaq. Today’s trade showed a lot of sideways movement, mirroring the sideways slide for the past month. I am hopeful that this consolidation will continue and if so it will be bullish. Low volume is a good thing in a consolidating market, which we are seeing. High volume in a sideways market is called “stalling” and is very bearish.

Fundamentals: America’s November consumer spending came in twice as strong as expected (on a percentage basis) and consumer sentiment was also very strong. Chinese industrial production beat expectations. America’s trade deficit narrowed on low oil consumption and strong exports. China’s gigantic trade surplus shrunk with domestic consumption up and exports down. The Chinese and American trade data indicate that the global imbalances (which caused the Great Recession) are easing. The dollar strengthened but miraculously stocks eked out gains without being artificially boosted by the carry trade. Everything is wonderful except US treasury yields continue to rocket upward as investors dump US government debt with both hands, mainly because the healthcare bill is gathering steam. All the polls show voters hate this thing; only about 35% like this monstrosity. House Leader Nancy Pelosi admits as much but says she is willing to lose up to 20 seats in the coming midterm elections as a penalty for passing this unpopular legislation. She thinks only Blue Dog Democrats will get booted out. The Dogs are itching to elect a different House Leader, so losing them will shore up Nancy’s power base. Obama must also be willing to jettison the Blue Dogs and tilt his party to the left. What’s puzzling is how the Dogs are rolling over, allowing themselves to get slapped around by the liberals. Yo, Blue Dogs, grow a set!

Geopolitics: Chairman of the Joint Chiefs, Mike Mullen, said that Army engineers are working at a furious pace to build facilities for the surge Marines that are hitting now in Afghanistan. Morale is up and the Pentagon is putting the pedal to the metal to get ready for the influx. The CIA is also hitting on 8 cylinders as a Reaper drone vaporized a vehicle speeding out of S. Waziristan and into N. Waziristan (Pakistan) that was carrying the infamous Al-Qaeda leader Abu Yahya al Libi, who carried a five million dollar CIA bounty on his head. So a Pak citizen is now collecting a huge sum and receiving help on relocation as well as a new identity. The drone strikes are unpopular in Pakistan, to everybody except those collecting multi-million dollar bounties.
Yemeni rebels say they have captured a Saudi Army base and continue to occupy it. The Saudi Army has not yet denied the claim. A Saudi newspaper says that the Army has captured and detained 1805 Yemeni rebels inside Saudi Arabia and implied that it is all hands to the wheel trying to stop the influx of bad guys surging up out of Yemen into the Kingdom. The Yemen war doesn’t seem to be going very well and the US needs to get more involved. Our team of geopolitical analysts here at DMU will spend the weekend combing Middle-East news sources for evidence that Uncle Sam is on the job.