Charts: the S&P 500 closed at 1174, up .7%. The index successfully tested support at 1154 twice since Friday. It bounced up against resistance at 1170 once, got knocked down, regrouped and popped through, bullish chart action. FXI is the blue chip index of China. Today it almost broke above its 200-day moving average. FXI’s chart action had been saying China was in a bear market. US leadership is fine, but in today’s global market it is technically significant for FXI to move above the 200-day line. Meanwhile, oil has been unable to breach resistance at $83 a barrel, good for China and America.
Fundamentals: Obama-Care front loads taxes and back loads benefits. It will probably lower the deficit for the next couple years and then massively raise it for the next few decades. Even the bond market doesn’t look years ahead and the stock market certainly doesn’t.
Every year the big iron ore miners and steel mills negotiate an annual ore contract. The talks are breaking down. Currently the spot price is about twice as high as the contract price because of Chinese demand. The biggest ore miner, VALE, is sensibly telling the big European mills that the contract price must double. The European mills are freaking out and trying to take legal action against VALE rather than hammer out a deal. The contract system is probably going to be destroyed and the price of ore is set to double. Steel represents 80%-90% of industrial metals, so the contract system collapsing is huge news and creates all sorts of losers and winners.
Geopolitics: Hillary made a speech in front of the most powerful Israeli lobby, blasting Israel with verbal bombs like this: “New construction in E. Jerusalem or the W. Bank undermines mutual trust and endangers… talks… that both sides want and need.” Slamming Israel in front of its lobby is incredibly bold. If Israel freezes settlement building, a Palestinian state will arise all by itself, even without peace talks. This would be a deadly blow to Al-Qaeda. It gets something like $500 million a year from wealthy Arabs who mostly give because of the Israeli/Palestinian conflict.
Israeli PM Netanyahu is in DC and firing back at Hillary, trying to play tough guy, big mistake. Defense Secretary Gates is talking about selling F35 Joint Strike Fighters to the United Arab Emirates. No Arab country has ever been offered a weapons system this advanced before. If Arab countries were allowed to buy the F35, Israel would be in big trouble.
On Sunday CIA drones killed 8 bad guys in N. Waziristan. Who was killed is not known because a drone wolf pack stayed in place and kept killing anybody that tried to help the wounded or even get close. The CIA does this only when it is extremely pissed off. The anger is probably due to ongoing Karzai/Taliban peace talks. Karzai better watch his step.
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