There Is Only The Long War

Charts: The S&P 500 closed at 1078, up 1%. The broad index punched through one resistance level, 1071 and then encountered round number resistance at 1080. Today’s advance comes in low volume so chartists are still divided if the correction is over or not. I’m saying that volume is less important than graphic chart patterns and we are in a shaky sort of rally. Equity volume has to be low to support the government bond market’s insatiable appetite. As Greek bond yields come down US bond yields go up. It’s all very scary.

Fundamentals: The EU says it will not let Greece default on its debt although it is still hammering out bailout details. Weekly US jobless claims unexpectedly improved by 43,000. Maddeningly, the Dept. of Labor said the bad numbers in claims over the past three weeks has been due to it goofing off over the holidays and allowing a work backlog to build, not fundamental weakness in the labor market. After dodging the bullet of Obama-Care the next big fundamental danger is Obama’s proposal to give employers $5000 for almost every new hire, which could cost hundreds of billions. The huge snowstorm engulfing DC may help derail this new deficit threat, perhaps a gift from the stock market Gods.

Geopolitics: Recently the Pak Army has been sending Cobra helicopter gunships into the mountain passes along the Afpak border to stop the flow of bad guys into Afghanistan. Yesterday the bad guys shot down a Cobra, killing 3 high ranking Pak officers and the crew. A bad guy ambush killed 20 more good guys sent in as a rescue team.
The Somali Army has begun shelling Al-Shabab positions in Mogadishu, killing dozens of bad guys as well as civilians. The fighting in other Somali cities appears to be a ruse and the big battle will be in and around Mogadishu. Al Shabab fighters are now pouring into the big city as well as thousands of freshly trained good guys. This is the only Islamic war run by the CIA and if the coming battle goes well it may become a template for other conflicts.
About 3 years ago Canadian forces crushed the Taliban in the city of Marja. The Canadians couldn’t hold the city and gave it back to the bad guys. After that experience the city’s tribal leaders don’t trust NATO to do the right thing and hold the ground it has conquered, even though they hate the Taliban. Today the Afghan government met with the tribal leaders and told them this time it will be different and the greybeards need to cooperate with authorities and get civilians out of Dodge. The Taliban has mined all escape routes from Marja and is telling civilians to stay put.
China has okayed the American aircraft carrier USS Nimitz to make a port call in Hong Kong. This is a sign that China has forgiven America for stuffing billions of dollars worth of weapons into Taiwan and playing footise with the Dalai Lami. More to the point, it is a sign that there is no Cold War between China and America. There is only one global conflict: the Long War.