CIA Not Pissed Off

Charts: The S&P 500 closed at 1136, down 1%. Support at 1132 held so graphic chart indicators still look okay. Other indicators such as leadership, volume patterns, and retail investor sentiment don’t look so hot.

Fundamentals: Intel reported blockbuster earnings, demonstrating the fundamental strength of tech. JP Morgan reported weak earnings, showing how financials are still in big trouble. Yesterday Team Obama unveiled a punitive scheme to tax big banks until they bleed. But the Fed has risked everything by artificially steepening the yield curve to give banks a gargantuan and ongoing subsidy. The Fed wants to build up bank reserves so they can withstand the coming losses from commercial real estate and defaulting consumer loans. It makes no sense to heap fresh taxes on banks while continuing to subsidize them.

Geopolitics: Thursday, CIA drones killed 15 bad guys in a town on the border between N. Waziristan and S. Waziristan. The target was Pakistani Taliban leader H. Mehsud. Reportedly H. Mehsud escaped just in time, although perhaps not unscratched. Friday, CIA drones killed 5 bad guys in a N. Waziristan town. The second drone attack was probably also targeting H. Mehsud although we don’t know yet if he was killed. H. Mehsud was involved in the assassination of the 7 CIA officers in Afghanistan a couple weeks ago. Since the assassination it has become clear that Al-Qaeda, the Pakistani Taliban, and the Haqqani network are all working closely together and drone strikes are hitting all three of these organizations very hard.
The CIA has for the first time publically addressed the topic of how pissed off it is. The CIA says that it is not pissed off at all, not even a tiny bit. The vast increase in drone strikes is not in retaliation for the assassination of its 7 top officers; a spike in new targets has simply become available in the routine business of running a spy agency. So I was wrong in my analysis that the Agency was and is extremely angry. It is actually cool as a cucumber. The Taliban is in trouble when the CIA does actually get pissed off.