Boots On The Ground

Charts: The S&P 500 closed at 1136, down 1%. Today’s decline was due to a poor start to the earnings season with Alcoa disappointing and China’s monetary tightening. Tech continues to falter and consumer staples are up, weak leadership. Since mid-October the index is up 3%. Support is at 1132, last week’s intraday low.

Fundamentals: On Monday China reported very strong economic data, in fact too strong because on Tuesday we learned the Asian giant is tightening monetary policy for the 2nd time in one week by curbing bank lending. Stocks levered to China are once again getting clobbered. American chain store sales fell 3% last week compared to the week before. American holiday spending was strong but there seems to be a sharp post holiday pullback.

Geopolitics: The Yemeni Army has recently given AQAP a black eye. It is now turning its attention back to the Houthi rebels in the north. Battles are flaring in the rugged mountains along the Saudi border. On Tuesday 8 Yemeni soldiers and 17 bad guys were killed. President Obama told People magazine that he would not completely rule out sending US troops to Yemen and/or Somalia but thinks there will be no need for “boots on the ground.” Joint Chiefs Chairman Adm. Mike Mullen said that there are not any boots on the ground in Yemen at present. He then went on to say that the US is not leading the Yemeni Army into combat. Adm. Mullen is a little clumsy with his spin. We know there are US Special Forces in Yemen, who wear boots, which make contact with the ground. And while we can’t know for sure that US Special Forces are leading the Yemeni Army in combat this is what Special Forces do, they train local troops and lead them into combat. The backdrop for all this evasive talk is AQAP screaming it is at war with America, not the Yemeni government. And the bad guy propaganda is having an effect as the #1 moderate Yemeni cleric backs a “no-US-boots-on-the-ground policy.” You can see why it is better (if possible) to have only the CIA running a Long War hotspot. Unfortunately that is not possible in Yemen.