Big Victory For CIA

Charts: The S&P 500 closed at 997, down .6%. The psychological 1000 level was breached but the technical support level of 996 held. The downdraft was caused by apprehension over Friday’s big jobs report rather than any real news. None of our secondary indexes are sounding any alarm bells. Technicals are still bullish.

Fundamentals: First time jobless claims came in better than expected and the 4-week moving average for new claims keeps getting better. Continuing claims came in worse than expected by a wide margin. Even though continuing claims look bad they are actually worse than they appear because long term benefits have a time limit, so tens of thousands of unemployed workers are no longer filing claims but are still unemployed. There have been several extensions so far and more are in the works. Once the new round of extensions kick in the federal deficit will grow a little bigger. Other “little” programs here and there are also swelling the deficit but not getting much attention. Five days ago Congress jacked upped the prices it pays on the various dairy support programs. The Post Office shocked Congress by announcing that it will lose over $7 billion this year, an all-time record that will keep getting worse as the internet makes the Post Office obsolete. The Clunker program is likely to cost taxpayers $10 billion before it expires, not $3 billion as the government believes. But yield on the 10-year note remains under the dangerous level of 4%; so there is no train wreck yet.

Geopolitics: On Wednesday and Thursday, in Afghanistan, 5 American soldiers were killed. 15 NATO troops have been killed so far in August, notching up an annualized rate of just under 1000 good guy combat deaths. The Pentagon refuses to give a bad guy body count. Despite intense pressure from European voters to remove all troops from Afghanistan, NATO asserted that European allies will stay and keep fighting.
In Pakistan, a CIA drone fired a missile into the house of Taliban super-chieftain Mehsud’s father-in-law. The missile exploded inside the room that Mehsud and his family use when they are visiting the father-in-law, indicating that the CIA has superb intelligence on the number one bad guy in the world. The Taliban confirmed that Mehsud’s wife was killed and four children seriously injured. Apparently Mehsud was not in the house at the time of the attack. Several years ago Mehsud killed the wife of the current Paki President so the death of the top bad guy’s wife has tremendous symbolic weight.