Don't Count Chickens Before They Hatch

Charts: The stock market is in a rally attempt. This attempt needs to succeed or we could be in big trouble. Earlier in the year the S&P 500 battled with its 200-day moving average. The loss of this battle knocked stocks down a good 10%. The line in the sand right now is with the formation of a death cross, where the 50-day moving average plunges through the 200-day moving average; when this happens the two lines form a cross. A death cross produces a full blown bear market about 50% of the time. The current rally attempt began just as the 50-day line had curved down and intersected the 200-day line. So we were saved by the bell. If this rally attempt fails and we get a fully formed death cross, then a savage bear market is likely.

If a death cross does not materialize and the market puts in a bottom, then we need to see apathy. We need to see sideways trading. Roaring up in thin volume, as it has done for 2 1/2 years, is not good.

Long War: The Libyan rebels have Tripoli 100% surrounded and are in the process of cutting off all the oil pipelines that feed the capital city. They are planning on choking Tripoli and fomenting rebellion from within. And indeed there have been small armed uprisings inside the city and this is why Gaddafi's top lieutenants are fleeing the ship. Now that he is cornered and on the brink of defeat, Gaddafi must decide whether to use chemical weapons or not. He practice fired a Scud missile yesterday, obviously a prelude to delivering chemical warheads into the rebel held city of Misrata.

Scuds are clumsy. Helicopters are the best way to deliver chemical weapons but then Gaddafi would have to fight through the NATO air force that is constantly overhead. So if he goes down that path, very few chemical weapons will get through. More to the point, the moral authority of NATO will grow immensely if it stops a chemical attack.

And if NATO wins the Libya War, it will be immensely strengthened. It will then start doing better in Afghanistan. No point in counting your chickens before they hatch. If NATO loses a war for the first time ever, the results will be apocalyptic.