Charts: The S&P 500 closed at 1166, up .6%. Resistance is at 1070. Oil hit $83 a barrel, encountered technical resistance and fell back slightly. Oil tends to trade in a very technical manner, so if it breaks above $83 it will probably keep going.
Fundamentals: Wholesale inflation came in cooler than expected. This validates the Fed’s ultra-low interest rate policy. If the Fed really can keep rates this low for another year, then lofty stock P/E ratios can be justified a while longer and earnings can play catch up to these lofty valuations. It all boils down to tame inflation for a long time. The greatest inflation threat on the horizon is soaring oil prices.
Geopolitics: Over the past few days CIA drones have killed perhaps two dozen bad guy leaders in repeated strikes against North Waziristan Taliban compounds. The NW Taliban is led by Hafiz Gul Bahadur, who has made various peace deals here and there, playing both ends against the middle, but remains one of the top bad guys in the world. The NW Taliban may be providing sanctuary for the upper echelon of Al-Qaeda, possibly Osama bin Laden. There has been speculation that Al-Qaeda leaders have moved into the slums of Karachi but the latest drone strikes suggest otherwise.
In January a team led by Gen. David Petraeus made a report to the Joint Chiefs castigating Israel and showing that it is causing major harm to the US in the Long War. Since Petraeus is the greatest military mind of our generation let’s take this as a given: Israel under its current leadership is a deadly enemy to the US. Right now there is bloody rioting in E. Jerusalem as Palestinian protestors are tangling with Israeli security forces. Pres. Obama has canceled a scheduled trip of US special envoy Mitchell to Tel Aviv, effectively scuttling peace talks, slapping Israel in the face, and aiding the Palestinians. Republicans in Congress are attacking the President because he is step by step dismantling the US/Israeli alliance. The Republicans are 100% brain dead on this issue and Obama is doing the right thing.
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