Saudi Spies Perform Miracles

Charts: The S&P 500 closed at 1118, up .2% on the day and 1.2% for the week. Major indexes are above 50-day and 100-day lines. Volume patterns have improved slightly so most chartists are saying we are in a shaky rally not a counter-cyclical bounce. 1115 is the breakeven point for the year, so overcoming this resistance is significant. 1120 is the 50% bear market retracement and a huge Fibonacci number, so it should provide big resistance. Healthy consolidation would see a trading range between 1150 and 1120.

Fundamentals: Gridlock has derailed the most recent extension of unemployment benefits. In most recoveries hiring returns only after benefits run out and workers start taking any job they can, so this helps both the budget deficit and the macroeconomic picture. Gridlock has also (for now) forced a cut to Medicare funding. Laws on the books automatically force spending cuts to Medicare unless Congress proactively unwinds these cuts every year. If gridlock became entrenched, Medicare cuts would automatically make the program solvent in time. Friday is the big jobs report, a source of potential volatility.

Geopolitics: Saudi’s spy agency is called GIP. Loose-lipped Pak diplomats are saying GIP and CIA have established a much closer working relationship. It seems GIP is the driving force behind ISI’s recent aggressive moves to roll up Al-Qaeda and Taliban leaders inside Pakistan. Only today, ISI arrested 7 more senior Taliban leaders. Also, Lebanon and Dubai’s intelligence services have recently been clobbering Israel’s Mossad with super advanced technology. Probably this technology has come from GIP acting as a proxy for CIA. The broad pattern then is CIA reaching out to its sister services within allied Muslim nations and at the same time stepping on Israel. In return, Muslim intelligence agencies are hammering the bad guys.
A few weeks ago a CIA drone strike wiped out an Al-Qaeda camp in N. Waziristan that was devoted to exporting jihad to China. Perhaps this is why US carrier battle groups are now welcome in Hong Kong harbor. CIA drones are still very active over the tribal regions in Pakistan and are racking up steady kills. Ground fighting in Marja Afghanistan and Pakistan’s tribal lands continues at a slow grinding pace.
Germany has responded to the Dutch Army pulling out of Afghanistan by increasing troop levels by about 800. This heroic action should put a stop to any further exodus from Afghanistan by NATO allies.