Chance Of Second Underwear Bomber

Charts: The S&P 500 closed at 1063, down 3.2%. The fledgling rally attempt has failed and the market is once again in a correction. The long term indicator, the 100-day moving average, was savagely violated. The market punched through support levels like Mike Tyson in his prime. The charts paint a grim picture.

Fundamentals: Weekly jobless claims came in worse than expected, which has now happened 3 weeks in a row and the market fears what the government’s big jobs report Friday will say. The great danger is that this spate of soft economic news will give the Demos a green light to pass a third stimulus bill, every step in this direction moves America’s response to the Great Recession closer to what Japan did in the 90s. Japan had 9 different stimulus packages over the “Lost Decade” and each package was less effective than the previous one. Eventually these Japanese stimulus programs created the longest bear market ever in equities and also the longest bull market ever for government debt.

Geopolitics: The FBI is doing a terrific job interrogating the Christmas day underwear bomber, who almost blew up a plane over Detroit. From the information thus gathered the CIA says there is a 100% chance that Al-Qaeda will attempt a terror attack on the US in the next 6 months, perhaps a second underwear bomber. There isn’t really a defense against such an attack, except at Al El, the Israeli national airline. The TSA will keep doing what it can under existing guidelines and the main thrust continues to be overseas military action such as Gen. McChrystal's big Afghan offensive which is only weeks or days away. Obviously a successful Al-Qaeda terror strike inside the US would hit global stock markets pretty hard.