Blinded By Anger And Revulsion

Charts: On Friday I incorrectly said the market was in a correction. Blinded by anger and revulsion over the Goldman criminal charges, I made a prediction rather than calmly looking at the charts. Technical analysis is not a prediction of the market’s future direction, but a snap shot of its current technical state. Rally or a correction? Bull or bear market? As of 4/30/10 the S&P 500 is neither in a rally nor a correction; the rally has morphed into stalling action within a trading channel. This is not good chart action, but the index did not dip out of its channel as of Friday.

Fundamentals: Obama-Care received a boost in the polls shortly after it passed. A few weeks later the bill started plunging in popularity again. Now it is more unpopular than ever with 60% of voters in favor of repeal. Terrified, the Demos are trying to reposition themselves for the mid-term elections by scoring a victory with financial reform, using even more hardball tactics than they used with Obama-Care. Financial reform polls very strongly, about 60% approve. But a similar number of voters also say it won’t work. So support is a mile wide and an inch deep and Republicans would be safe filibustering if not for the hardball tactics. The basic Demo strategy is to get Goldman Sachs to settle out of court on the various trumped up charges it faces and then point to this admission of guilt as a reason to shove financial reform down America’s gullet. Goldman settling would be short term good and long term bad.

Geopolitics: The hottest theater in the Long War right now is Somalia. The Somali Army is in a pitched battle with Al-Shabab, probably being helped by Ahlu Sunnah. Hizbul Islam is in a separate battle with Al-Shabab. Ahlu Sunnah is in still another battle with Hizbul Islam. CIA Director Panetta publically admits that there is a “CIA surge” going on in Somalia and it is safe to say that the complex four-way conflict is being choreographed to some degree by the Agency.
It is a complicated war and it is unclear who are the good guys and bad guys. Al-Shabab is definitely bad, in fact super-bad. It controls almost half the country and is the most savage Taliban-style government in the world. Its leaders have Al-Qaeda on speed dial. Hizbul Islam controls a big chunk of Somalia, but not as big as Al-Shabab. It is unbelievably savage and amputates limbs for minor offenses, beheadings at the drop of a hat, etc… It had been partners with Al-Shabab but it is now taking territory away from the super-bad guys, blowing up Al-Shabab Mosques, and killing rival leaders. This makes you think Hizbul Islam is in the good bad guy camp, but it’s not that simple. The CIA probably has something to do with the war between Al-Shabab and Hizbul Islam, but maybe not since the genuine good bad guys (Ahlu Sunnah) is attacking Hizbul Islam. Al-Shabab spokesmen accuse the Somali government of helping Hizbul Islam, perhaps without CIA approval.
We probably should simply classify Ahlu Sunnah as straight good guys. The CIA apparently wants this Islamic militia to take over the Somali government. Ahlu Sunnah controls central Somalia and has defeated Al-Shabab in several battles. The Somali government is of indeterminate status. Its soldiers are as likely to sell their guns to the bad guys as fight. The long planned offensive seems to be occurring but it also seems to be heavily dependent on Ahlu Sunnah.