Correction begins

Charts: The S&P 500 smashed downward through its 50-day moving average today. Chartists will say that the market is now in a correction. While they are probably right we should be alert to the possibility that the market is entering a period of sideways movement. There are some ugly chart indicators smacking us in the face but there is one bright spot: correlation between stocks has dissipated. It is a stock pickers market but a very challenging one.

Fundamentals: Lately I've been talking about the super productivity of corporate America. Today the Journal ran an article that says productivity has peaked and is starting to come down. This means, once again, we have only one hope: that our good friends at Langley can straighten out the Long War and bring oil prices down. Which means we could move into consumer stocks even more than we already have.

Long War: There are more Al-Qaeda operatives in Yemen than in Afghanistan and Pakistan combined. Yemen is the true heart of the evil beast. The CIA has nearly finished purging the Yemeni Army of bad guys. Pro-American Yemeni President Hadi is establishing control over his armed forces and the war is being taken to the bad guys. The Western Press is reporting that Yemeni warplanes are making strike after strike. But it seems more likely that these air strikes are CIA drones firing Raytheon Hellfire missiles. This is probably happening while the Yemeni Air Force has an airplane or two loitering about, providing a plausible explanation for the aerial assault to the Western press. I am encouraged by the press management style of the new CIA Director.

AQAP is unable to spread out of Yemen and into Africa by way of Somalia because the CIA has destroyed Al-Shabab's conventional force structure and reduced the Somali bad guys to terrorists who have limited ability to seize and hold ground. This means AQAP and AQIM cannot combine forces through a kind of land/sea bridge. So there is good long term strategic planning and execution. AQIM is, however, spreading out in Africa and has its own kingdom now in Mali.

In Iran the Ayatollah seems to be gaining power over Ahmadinejad. This is bad.