Worst Case Averted

Charts: The market is bouncing back in low volume today. Since the market has in fact entered a technical correction, today's action is best described as a rally attempt. A true technical rally will require a consolidation period after the rally attempt and then a follow through day where the gains come in greater volume.

Long War: What's cheering the market today is that the Day of Rage scheduled for Saudi Arabia did not occur because of massive security presence in Riyadh. Rage protesters in other Mideast countries were active, however, so this one bit of good news does not mean the Rage Rebellion is over. Oil fell as Saudi Arabia stood above the chaos and the worst case scenario of the Kingdom falling to the Rage has been (apparently) taken off the table.

Gaddafi's Libyan Army had suffered from defections, which left it organizationally crippled at first, but it is now reorganized and acting like a professional army again, able to make amphibious landings, organize simultaneous ground and air attacks, and all the other things that real armies do. The Libyan Rage Rebels do not have a true army and they are losing. James Clapper, the US Director of National Intelligence, predicts that Gaddafi will win. If that happens Libya will join Iran and Eritrea as jihadist nation-states.

Obama gave a press conference today where he essentially ruled out military action against Libya. In a way this is good news because it means NATO and/or the US is not going to do something really stupid like a No-Fly Zone Lite. So we have another worst case scenario taken off the table.

Charts Again: The removal of worst case geopolitical scenarios could mean that today's rally attempt is a sort of relief rally, which is not a sturdy basis for a new leg up in the bull market. The very low volume could mean that today's uptick was fueled by short covering. We know that short interest has grown since the Rage crisis began and the shorts live up to their name, i.e. they don't hold their short positions for a very long time. What it all boils down to is that we must demand good chart action before getting super bullish.