Israel Temper Tantrum

Charts: The S&P 500 hit 1292, the October peak, found support and bounced up sharply off that level on Monday in weak volume. It is a good thing that the index was able to respond to a technical support level, this at least broke the waterfall pattern. The weak volume is bad. Today the index finished almost flat after giving up a medium size gain in the middle of the day. This is a negative reversal, not good. The market is in a rally attempt, not a technical rally. This rally attempt is a little iffy because of the weak volume and the negative reversal.

Fundamentals: Opinion polls show Greek voters are evenly divided between pro-austerity parties and anti-austerity parties. This is an improvement because anti-austerity (hard left) parties had been surging before the upcoming election (only weeks away). The hard left is saying Greece cannot be forced out of the Euro-zone because there is no treaty mechanism to do that. This is how Greece will leave the Euro-zone if the hard left wins the next election: There will be a run on Greek banks (already happening to a small degree). Then Greek banks will run out of euros. The ECB will stop pumping euros into these banks because the government is breaking the deal allowing for ECB funding. Without euros the Greek government will have to print its own currency. At that point it has left the Euro-zone. In the long run (several months to several years) this will be a good thing. In the short to medium term it will hammer stocks very badly. So there is a 50/50 chance this will happen based on opinion polls.

Long War: A group of bad guys let off a suicide bomb in the middle of a (good guy) Yemeni military parade, killing 100 good guy soldiers. Al-Qaeda did not claim responsibility right away. So AQAP most likely did not set off this bomb. Probably anti-regime forces loyal to the old dictator Saleh are the bad guys. It is tough that the good guys in Yemen are facing a new enemy as they battle Al-Qaeda.

Israel is aggressively expanding settlements in the occupied territories. Furthermore these new settlements are strategically located to really screw the Palestinians. Israel is throwing a temper tantrum with this action. Why is it acting like a big spoiled baby? Because it is being prevented from attacking Iran by the US. So this is good.

As a consequence the Iran anti-nuclear peace talks with the US-led group of big powers called 5 plus 1 are off to a good start. This is pressuring the price of oil which is good of course.