Good Guys Strike Back in Libya and Yemen

Charts: At Friday's close the S&P 500 was sitting exactly on its 100-day moving average at 1316. The market is not in a correction nor is it in a rally. It is balanced on a precipice and could go either way from a chart viewpoint. Monday's close and the coming week will be significant to give direction for the rest of the summer.

Fundamentals: This week the US debt ceiling crisis comes to a head and so does the Greek debt crisis with key meetings taking place on either side of the Atlantic. The fundamental picture is balanced on a precipice and this is why the charts are pointing in two directions. On Thursday Greece needs to be actually bailed out with either direct capital injections or EU debt guarantees that lower interest rates, extend and pretend will no longer cut the mustard. Potential outcomes for America's big debt decision is not so clear. If the debt ceiling is raised without meaningful spending cuts, there could be a relief rally as America avoids default. But the global sovereign debt crisis will then get worse. The entire sovereign debt issue is unpredictable.

Long War: Several months ago Al Qaeda seized control over the biggest city in the Yemeni province of Abyan, carving out its own little Caliphate, its own little piece of hell on Earth. In the process it isolated and surrounded the Yemeni Army's heroic 25th Brigade. The bad guys have laid siege to the 25th Brigade ever since. Their inability to destroy the 25th has halted their expansion so far.

A coalition of Yemeni Army regulars and armed tribesmen are fighting through Al-Qaeda front lines this weekend, tearing through the bad guys to rescue the beleaguered 25th Brigade. If the good guys can do this they will have split the enemy forces in two and can start to dismantle the Al-Qaeda caliphate in southern Yemen.

The fact that tribes are fighting with the Yemeni Army speaks to CIA involvement in the offensive and drones are probably providing air support. Even though it will largely be ignored by the outside world, this is a very important battle in the Long War. If Al-Qaeda crushes the offensive and goes on to destroy the 25th, it will be very bad. If the opposite occurs, it will be very good.

In Libya we have seen the Berber tribes in the western mountains making progress but not much has happened in the oil rich east around the city of Brega. That has now changed. The rebels have pushed a professional army up into Brega from deep inside Benghazi and have launched a big multi-pronged assault on the key oil center. NATO war planes are providing massive air support and as of Sunday 1/3 of Brega has been liberated by the Free Libya Army. As Gaddafi's army retreats it is laying down gigantic mine fields to slow the good guy onslaught.

This offensive comes hot on the heels of America officially recognizing the rebels as the legitimate government of Libya. This move will eventually result in the release of $30 billion to the FLA from frozen Gaddafi bank accounts. With $30 billion the FLA can buy attack helicopters, tanks, etc... The combination of these two events will crash the morale in Gaddafi's officer corp and defections are sure to follow.

Gaddafi, however, has billions of his own and the rebels will need a big fully equipped conventional army to wrest Gaddafi out of Tripoli. Ramadan starts in two weeks. Gaddafi is mounting a propaganda blitz to show the Muslim world that the Christian nations in NATO are getting ready to bomb Muslims during the holy month. This propaganda campaign is already bearing some fruit for Gaddafi.

In Afghanistan, the CIA's point man, Ahmed Wali Karzai, was asassinated by one of his security chiefs. The Taliban claimed responsibility for the killing but experts say this is not the case; so some other organization was behind the killing. Ahmed Karzai used drug money to run a CIA supported militia and spy ring in Kandahar. The CIA seems to be already putting forth another strongman, General Raziq, to take over southern Afghanistan.

Ahmed Karzai rigged the last election and helped his brother (H. Karzai) retain the Presidency of Afghanistan. It is a good thing that A. Karzai is dead. General Raziq will create a power base that will help dethrone H. Karzai, who has become a liability. H. Karzai is now prone to calling NATO an occupying power and is in peace talks with the Taliban. Whoever killed A. Karzai might kill H. Karzai. Who do you think killed A. Karzai?