Charts: On Euro-debt fears, the Dow plunged under 11,000 yesterday but regained that key support level today. Also on Tuesday, in massive volume, the S&P 500 smashed through support at 1200 and 1190, for a savage 2.3% loss. Today the broad index retook 1190 in good volume to finish at 1191, up .7% on the day. Leadership is poor. The rally is intact but very fragile.
Fundamentals: This week S&P downgraded the debt on Greece, Portugal, and Spain, jacking up yields on Euro-periphery bonds, increasing the chance of default and pushing the global financial system a step closer to Armageddon. In response, the EU and IMF are saying $132 billion will soon prop up Greek debt. Finally they’re hitting Greek debt with a hammer.
Republicans are halting the financial reform bill. Their filibuster is holding because Democrat Sen. Nelson has joined the Republicans. Financials are supporting the entire market right now. And the filibuster is supporting financials. In other words, if Sen. Nelson caves in there will probably be a market correction. He caved in on healthcare, so this is a real danger.
S. Korean GDP surged 7.8% y/y, reminding us that strength in emerging Asia counters weakness in Europe. The deciding factor is therefore America, which magnifies the importance of financial reform failing.
Geopolitics: Israeli PM Netanyahu just blinked in his stare-down with Obama, agreeing to freeze settlement building in E. Jerusalem and buckling on a host of other issues that should get peace talks going again with the Palestinians.
The interim government of Kyrgyzstan has not yet established control over the country. Looting in the capital city is increasing day by day as are anti-government demonstrations. The family of the deposed Kyrgyz President is actively working against the government but there is not yet a genuine Islamic insurgency, probably because the Taliban is gearing up for the coming Battle of Kandahar. Russia’s FSB is straightening out this mess, maybe with US help.
Thailand too is sliding into chaos at the hands of pro-democracy rebels. Unfortunately Thailand has an established Al-Qaeda linked Islamic insurgency and chaos plays into its hands.
With the far-flung nature of these Long War conflicts in mind, the CIA announced restructuring efforts that will allow it to quickly “surge” officers to hotspots around the globe. Just such a surge is occurring right now in Somalia and Yemen.
Meanwhile, CIA drones killed 5 bad guys in Pakistan Tuesday. The Afghan Taliban attacked a NATO supply depot in Kandahar and says it is laying in supplies for the big battle. The Pak Army killed 5 bad guys Wednesday. In a little over a month the Pak Army has killed 450 bad guys and destroyed 50 Taliban outposts.
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