Bad Guys Fight Back

Charts: The S&P 500 closed at 1081, down .9%. Today saw a savage reversal with an upbeat market completely turning around and plunging in the final hour. Support held at 1080. This will be a key level to watch tomorrow. The volume pattern has been bearish for two weeks now.

Fundamentals: The Fed’s Beige Book said that consumer spending is soft. Wells Fargo received a downgrade, which shook the market. The underlying problem is that the dollar keeps plunging which causes oil to soar. This is what Professor Roubinin warned against. He says that if oil hits $100 there will probably be a double-dip recession. Congress is getting ready to add another $250 billion to its healthcare reform package. This is pressuring the dollar.

Geopolitics: The Paki Army has lost ground in the most recent fighting. On the route to Makeen, it had seized the tiny Taliban village of Kotkai. This is the birthplace of H. Mehsud, the heart of darkness. The Taliban threw the Army back and recaptured Kotkai. Heavy fighting still rages around Kotkai. It is an accepted tactic to allow a powerful enemy to advance quickly and then counterattack as he gets extended. The Taliban may be doing something along these lines as it fires down upon the strung out Army from rugged mountaintop positions. So far in the campaign the Army says it has killed 115 bad guys while 16 good guys have been killed. The Taliban says that it killed 40 good guys alone in the battle for Kotkai. The Army seems to be halting its infantry, digging in and using artillery plus helicopter gunships to soften up the bad guys before it resumes advancing.
Outside of S. Waziristan, the Taliban continues to launch terror attacks. There have been numerous attacks in Pakistan and a second attack occurred in Iran where two cops were gunned down. The Iranian Revolutionary Guards are incensed, begging the Ayatollah for permission to hunt down Taliban fighters in Pakistan. The Paki Army cannot tolerate Iranian soldiers on its soil so this is a potential problem. India claims to have intelligence indicating that the Taliban are planning terror attacks within its country. The Taliban is fighting back hard and intelligently.The Afghan runoff election will be held on Nov. 7. With such a short time frame, election results will be the same as the original one. Karzai didn’t stuff ballot boxes himself. This was done by local Pushtuns throughout the country and it will happen again. I thought the international community would try to mount a huge effort at an honest election and it would occur in the spring. This quickie election is better, get the damn thing out of the way.