Charts: Today saw a sharp downturn. The broad index was down over 1%. Small caps were down 2%. Materials and industrials were down 3%. We've seen Doji Candlestick formations over the past few weeks and have been expecting chart weakness. If this weakness morphs into a correction we have to zero in on support levels and volume to guess what comes next. First support is 1500 for the S&P 500. If that holds convingly the downturn might be over.
One chart that doesn't get much attention is the graph for the US Stock market as a percent of GDP. In other words the stock market is worth X amount and GDP is Y amount and X is a percent of Y. Right now the stock market is about 130% of GDP, normally it is about 75%. The chart shows the % amount has been declining in a classic trend line pattern over the past 13 years, the length of the secular bear market. We will talk more about this in later blogs.
Fundamentals: Fed minutes today said that the party won't last forever and the Fed will have to quit printing funny money someday. The market acted like a spoiled little baby who had a lollipop taken away. Waaa! We want funny money, don't stop printing funny money. I don't like it when the market acts childish because children are unpredictable.
Long War: Senator McCain is acting as though he will give up trying to block Obama's picks for Sec. of Defense and CIA. Why did he change his mind? More important, why was he being so stupid in the first place? Okay forget the theory he was smoking crack. Probably he was acting so porky because the CIA is allowing Qatari Intelligence to use Al-Qaeda to win the Syria War. Fair enough, that is pretty scary. I think McCain changed his mind about blocking the nominees because somebody he respects sat down and had a chat with him, telling him in no uncertain terms to "Back the %$^# off and greenlight these nominees, you jackass. You don't have a %&$# clue how we should win this war with your fat ass welded to a Washington swivel chair." In any case he does appear to be caving and soon we will have a dovish Sec. of Defense and a hawkish CIA Director.
Sounds good to me. I will agree with liberals and say "Bring our boys home. Get the US Army out of the Long War." Of course the liberals don't want to hear what I have to say next, which is: "Turn loose the spooks from Langley."
And what a good job the spooks have been doing. Syrian rebels have taken away Assad's artillery bases. So Assad has to use Scud missiles to hit back instead of artillery. Scud missiles are inaccurate terror weapons designed to hit civilians, not weapons of war that can be used against other armies. The fact that he is using these terror weapons shows that he is at the end of his rope.
In Mali the French need help from the CIA. It can't come soon enough. The French government is planning on pulling the Foreign Legion out in a couple weeks but the bad guys are striking back hard. Yesterday the Legion was caught in a firefight that involved hundreds of soldiers. If France pulled out right now Al-Qaeda would regain control over the north very quickly and there would be no chance of a second Western intervention.
Mali needs CIA drones and it needs them yesterday. Unfortunately the looming budget cuts known as sequestration will slash the production of drones dramatically. Sequestration is designed to cut the most vital of programs because of a half-baked notion that if the cuts are really really stupid then they won't occur. Right now the Pentagon is saying, "Please give us flexibility, we will cut the amount specified but let us pick and choose." Probably the brain dead politicians will pull their heads out of their bungholes just long enough to say to the Pentagon, "Okay."Then their heads will go back into their bungs and they will do more stupid brain-dead nonsense. This is the world we live in. It is a trail of tears.
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