Tuesday, February 9, 2010

Storm Clouds Of War

Charts: The S&P 500 closed at 1071, up 1.3%. The downturn Monday did not take out Friday’s low. That combined with today’s upswing reinforces the notion that Friday’s big plunge and positive reversal was indeed capitulation. This speaks to the correction being over. From peak to trough (intraday) the broad index lost only about 9%. That would make the correction pretty mild. We still haven’t had a traditional 10% correction, a cause for concern. 1071 is a resistance level and it is disappointing that this level was not taken out. Above that resistance is at 1085.

Fundamentals: Today’s upswing was fueled by rumors that Germany will bailout Greece and force harsh government spending cuts on the free-spending Mediterraneans. The correction has been largely a result of possible credit defaults on the part of Greece, Spain, and Portugal. The rumors need to be true for a new rally to start. Also, there must be concrete plans for Portugal and Spain.

Geopolitics: 2500 newly trained Somali Army soldiers (good guys) are pouring into Mogadishu. These soldiers have been trained in “secret” camps in Kenya run by the Kenyan Army and the CIA. Everyone is caught by surprise as to the size and quality of this troop influx. Al Shabab has pulled back from exposed positions and is digging in as big battles loom in three Somali cities. Al Shabab is furious at Kenya and declared holy war against the East African state. Kenya has moved troops and armor to the Somali border. Ethiopia has moved its troops into Somalia proper, seizing at least one village, perhaps a launch point for the Somali troops that Ethiopia has been training. The coming Somali Army offensive is probably designed to complement the NATO offensive in Marja Afghanistan and stretch Al-Qaeda resources. The Taliban boasts that Arab fighters have been pouring into Marja to help stop the Marines. The Somali Army says that it is starting to capture Arab fighters (Al-Qaeda types) in Somalia.
On Monday the Yemeni Army says 10 of its soldiers were killed by Houthi snipers but it was unable to retaliate and kill any of the bad guys. The Saudi Army has added artillery fire to its bombing campaign against the Houthis. AQAP benefits from all of this. Yemen is becoming a bit of a weak link in the Long War.
On Monday, in S. Waziristan, Pakistan, 12 Pak Army soldiers were killed and 6 Taliban fighters killed. Even though victory was declared in S. Waziristan a while ago heavy fighting continues. The bad guys are probably trying to keep the pressure up in Pakistan as the Battle for Marja looms, tying down the Pak Army so bad guy reinforcements can be funneled to Marja.
In Afghanistan, NATO and Afghan Army troops are right on the edge of the battleground city of Marja. Five American soldiers have been killed in the last 24-hours as initial skirmishes begin. Heavy US airstrikes are pounding bad guy infiltration routes along the Afpak border, killing dozens of bad guys including a senior leader of the Haqqani network. Al-Qaeda and Taliban fighters are digging in furiously in Marja. Civilians are fleeing the region. The air is heavy as the storm clouds of war coalesce.

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