Jihadists Getting Clobbered

Charts: The S&P 500 closed at 1103, up 1.3%. Yesterday the index pushed above the 100-day moving average (good). Today the 100-day line was tested in an early downdraft. Support held at exactly the 100-day line, to the decimal point. That graphic display of obvious support at the long term technical indicator cheered the market for steady gains throughout the session. The market has gone from correction to rally attempt.

Fundamentals: ISM manufacturing data came in stronger than expected from 4 different continents. China consumes about 50% of the world’s industrial metals and its successful stimulus plan is leading the global industrial boom. December US personal spending came in weak and US construction spending plunged as one housing subsidy expired before the second one took hold. Early signs are that the second housing tax credit is working. Of course propping up housing with gargantuan US deficits is problematic but today Japan instructed its treasury to buy US debt, which knocked down US government debt yields. It pays to be the Superpower.

Geopolitics: In Pakistan, on a strategic mountaintop near the Afghan border, a massive two-day artillery barrage subsided Tuesday. As the smoke cleared Pak helicopter gunships and fighter bombers moved in and scorched what was left of a Taliban compound with withering fire, killing 14 bad guys; 27 more were captured and taken prisoner.
The world’s number one bad guy, Pak Taliban leader H. Mehsud was severely wounded by CIA drones in January, not killed as reported by the Pak media. However, the CIA seems to know where he is hiding, a village in N. Waziristan. That village has a permanent drone wolf pack circling overhead. On Tuesday this 5 drone wolf pack laid down a monster missile barrage, killing about a dozen bad guys and obliterating a Taliban compound. CIA double agents are picking through the rubble, searching for H. Mehsud’s corpse.
There is good tribal news out of Afghanistan. The Iraq war turned around when the Pentagon succeeded in training, equipping, and paying Sunni Awakening tribes that had originally pledged allegiance to-Al-Qaeda. A mighty army arose and clobbered the bad guys. In Afghanistan there is not a Sunni/Shiite divide. The focal point is the tribal structure of the majority Pushtun ethnic group. The Pushtun tribal family tree has two main branches: 1) The Durrani, who are mostly pro-American. Pres. Karzai is the leader of the Durrani. 2) The Ghilzai, who are mostly pro-Taliban. Mullah Omar is the most prominent Ghilzai. The equivalent to the Awakening Movement occurs if sub-tribes among the Ghilzai switch allegiance and start fighting the Taliban with US help. This is already happening: a sub-tribe within the Ghilzai called the Shinwari has signed on to fight for the good guys.
The Japanese Navy has stopped refueling American warships in the Indian Ocean. Japan wants US military bases off its soil. It is begging to participate in the alliance purely financially, like buying extra T-bills. Japanese nerves are too frayed to continue as a military partner. Pres. Obama has responded by pouring weapons into Taiwan. One ally in East Asia is getting weaker so you build up your other ally right next door. It is possible Germany will pay Poland to take over its NATO commitment in Afghanistan because Germany is currently short 3500 troops and a major offensive is being launched.