America's Allies Pick Up Slack

Charts: For about one month the S&P 500 has been correcting. During the correction a clear downtrend trading channel has emerged. If the index closes above 1335, then it has broken up out of the trading channel. And it would also then be above the 1333 Fibonacci retracement level.

Fundamentals: The market is rallying today on the prospect of Greece getting a second bailout. This new bailout is supposed to be better than the old one because Greece is apparently being forced to sell state owned assets in order to get the bailout. The Greek government has $300 billion worth of assets.
So that's the good news. The bad news is that every other economic indicator sucks as the world economy is slowing down sharply on the back of high oil prices. Only two things can break the back of oil's climb upward: A double-dip recession or victory in the Libya war.

Long War: There are reports of British soldiers fighting on the front lines of the Libya war. France says that British and French attack helicopters will soon enter combat. The British soldiers are probably part of an advanced team that will rescue helicopter pilots downed by shoulder fired missiles.

Al-Qaeda has seized control of two towns in Yemen and declared an Islamic Emirate. In northern Yemen, Iran-linked Houthi rebels are also setting up their own country. The Yemni government is bombing the Al-Qaeda held towns but it is powerless to deal with the Houthi rebels. This is the same government that the US officially says should be dissolved. So we have an upside down Alice in Wonderland situation if we are to believe official US government pronouncements. Obviously Al-Qaeda creating its own country is very bad. However, the fact that the Yemen government is attacking Al-Qaeda even as it faces a separate rebellion in its own capital city is very good. Somehow somebody is pressuring Yemen to act against its own interests.

There are rumors that the Pak Army will launch an offensive against North Waziristan due to US pressure of some sort. This would be very good news if it is true. The Taliban spring offensive in the entire Af/Pak region is much stronger than anticipated.

Ethiopia says it is sending thousands of soldiers to the border region of North and South Sudan to enforce a demilitarized zone. The prospect of the Sudanese Civil War flaring up has diminished.

A pattern emerges in all these Long War events: America is not engaged the way it should be in the global conflict but America's allies are picking up the slack. It is interesting that various US allies seem to be acting under the threat of pressure of some sort.