Fibonacci # Is No Joke

Charts: The S&P 500 closed at 1116, down 1.9%. 1120 is a Fibonacci support level. Just because the word “Fibonacci” is funny sounding does not lessen the grave technical damage that violating this level will create. It will be no joking matter if a technical correction occurs. No multi-year bull market has ever failed to register at least one correction of over 10%. The current bull has not yet had a 10% correction.

Fundamentals: China reported stronger GDP growth than expected, bad news because it will accelerate China’s tightening cycle. America’s weekly jobless claims came in weaker than expected as did the Fed’s Philly manufacturing index. President Obama announced still another moronic scheme to punish banks. This one is designed to shrink banks that are “too big to fail” by curbing their trading activity. The financial crisis was not caused by banks being too large. The savings and loan crisis of the late 80s was very similar to today’s credit crunch. Back then hundreds of very small financial institutions went bust en masse rather than a few big ones. China’s banks are now much larger than America’s but are much sounder. It is impossible to overstate how damaging it is for Obama to attack banks right now.
Greek government bond spreads are now widening (getting worse) on Chinese tightening news. If Greece defaults on its debt it will cause a domino effect among other highly indebted small countries such as Portugal. If this were to happen, world stock markets would get clobbered.

Geopolitics: The Long War started in 1989 and America ended its strategic debate on how to win the war in 2009, settling on a long term strategy called counterinsurgency. The Cold War started in 1945 and America ended its strategic debate on how to win that war in 1948, settling on a long term strategy called containment. If the Long War continues to evolve at about 1/6 the pace of the Cold War it will last 270 years. Politicians keep telling the American public that the LW will end with whichever mini-war is being fought at any one moment in time. George Bush said that it will be over with the Iraq war. Obama is saying it will be over with the Afghan war. Some future president will say the LW is over after the Somali war has ended. After that Indonesia. Eventually the term whack-a-mole will enter the public lexicon and voters will understand how long the LW is going to be.