Charts: Yesterday’s chart action resembled capitulation, but it was a mirage. Bizarre electronic trading anomalies caused the illusion. The market is in a correction. The S&P 500 closed down 1.5% at 1110. Next support is 1100.
Fundamentals: The government’s monthly jobs report came in much better than expected, suggesting that the US recovery is still on track. Here’s why it might not matter: The most significant event yesterday occurred when a Senate page interrupted the financial reform hearings with the breathless news that the Dow had dropped 1000 points. The Senators angrily responded by saying they needed to hurry up and slap even stiffer regulations on those volatile Wall Street scoundrels, trying to put out fire with gasoline.
Geopolitics: On Thursday, up and down the Pak tribal lands there were clashes with government forces and Pak tribesmen on one side and the Taliban on the other. 41 bad guys were killed and 1 good guy was killed. The Pak Army killed 26 bad guys and the tribesmen killed 15. The 1 dead good guy was a Pak soldier, so the tribesmen had an infinite kill ratio. It is impossible to win a guerilla war with the local population hunting you down and killing you. Furthermore, the Pak tribesmen are being superbly trained, armed, and lead; acting like a professional army.
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