Charts: The S&P 500 closed at 1095, up 1.8%. The index pushed above the 100-day moving average which right now is 1091. If it trades above the 100-day line for several days, then the charts are saying the correction was a garden variety one, the fledgling rally will continue, and a new bear market is not imminent.
Fundamentals: The EU has clarified its bailout plans for Greece. The still evolving plan is a form of tough love: heavy on the tough, light on the love. The stock market would like to see all love. The bond market likes the tough. Since the bond market is leading the stock market right now, tough is good. Today’s rally was a gift from the EU and the USMC (see below).
Geopolitics: Gen. McChrystal is a genius. On the second day of the Battle for Marja 12 civilians were killed by a ground based rocket barrage. McChrystal ordered a halt to this kind of rocket fire and a thorough investigation. Dead Taliban fighters were mixed in with dead civilians. Restriction on rocket fire was lifted. Even the gum-flapping human rights organizations are knocked back by the General’s rigid honesty concerning civilian casualties. He is controlling the Western press. And the citizens of Marja trust the general to keep civilian casualties to a minimum without giving the bad guys a break. When the Taliban blatantly use human shields, the Marines still blow them away, but as carefully as possible. Long story short: the Marines are winning the Battle for Marja and McChrystal will soon open his government-in-a-box. He will then become the Emir of Helmand Province.
The CIA and the ISI have captured the number two leader of the Afghan Taliban, Mullah Baradar. The ISI interrogated this super-bad guy with the CIA observing. The ISI does not have restrictions against water-boarding or tearing off toenails or using even more brutal techniques. The intelligence being gathered by the ISI from Mullah Baradar is vast. Also, it is now virtually certain that H. Mehsud is dead.
Losing in Marja, having the number two Afghan Taliban leader captured, and the number one Pak Taliban leader killed are three colossal blows one right after the other. The bad guys are indeed feeling the pain. Taliban statements are coming out fast and furious. The statements are bellicose but verging on hysteria: “We are winning in Marja! Our top leader is not captured! He is not singing like a canary! Western media is lying!”
All the big Talibans are screaming except one. Gulbuddin Hekmatyar, the leader of the fourth most powerful Taliban, is in peace talks with the good guys. And why not? Honestly cooperating with the CIA lines your pockets with millions of dollars, plus the ISI doesn’t tear out your toenails: a win/win situation.
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