Dow Under 10,000

Charts: The S&P 500 closed at 1088, down .8%. The Dow closed at 9996. Retail investors will be disappointed that Dow 10,000 did not hold. Professional investors are relieved that support held for the broad index at 1080. The rally needs retail investors at this point.

Fundamentals: Some people consider GE to be the ultimate bellwether because the gigantic and sprawling conglomerate mirrors the entire US economy with its disparate holdings and businesses. GE reported a bottom line beat but revenue was a nasty miss. Investors have stopped drinking the Kool-Aid and are now demanding revenue beats. GE’s weak performance is the reason for today’s sell-off.

Geopolitics: The Paki Army is still building its ground forces around the border of South Waziristan. The two mechanized divisions are being fortified with infantrymen. As Paki troops pour into launch points the Taliban attack them with mortar fire, killing 3 good guys Friday. Helicopter gunships have joined jet fighter-bombers in the aerial assault. The bad guys are fighting back. Terror attacks in the rest of Pakistan are reaching a bloody crescendo. A wall of steel is about to slam into the bad guys in South Waziristan but a wave of terror attacks is smashing into the soft civilian underbelly of Pakistan’s non-tribal regions.
In Yemen, government security forces have captured a number of suicide bombers streaming up from the southern part of the country where a second rebellion bubbles menacingly alongside the exploding one to the north. It is not a good sign that the southern rebellion is heating up while open warfare rages to the north. However, every day brings more evidence of Saudi military aid to the beleaguered Yemeni government and Yemeni Army. The northern rebels are supported by Iran, therefore the Yemen war is in some ways a proxy struggle between Saudi Arabia (good guys) and Iran (bad guys).
The Somali war rages on and it is taking some interesting turns. Hizbul Islam did not attack its partner, Al-Shabab. Initial reports were inaccurate. We have to learn the name of a new militia: Ahlu Sunnah. This group is sponsored by the Somali government/CIA and consequently Ahlu Sunnah fighters are good guys, powerful good guys apparently. Earlier this week, Ahlu Sunnah attacked an Al-Shabab village, beat the tar out of the super-bad-guys, and seized control of the village. Ahlu Sunnah has been fighting Al-Shabab for two years. Only within the last few days have we learned that these powerful good guys are a serious threat to the super-bad-guys.
The Kenyan Parliament is angrily investigating reports that its military is raising a small good guy militia of about 300 fighters near the Somali border to use against Al-Shabab. The Kenyan Parliament didn’t authorize this action and doesn’t like its Army doing the bidding of the CIA and getting Kenya embroiled in the Somali war. Too late, Kenya is already embroiled. Damn those CIA meddlers.
Obama met face to face with General McChrystal earlier this week. Rumors are swirling out of the Pentagon that Obama is going for the McChrystal Plan with 40,000 new troops. This is according to the Financial Times. If the FT story is accurate, it is a bullish development.