Charts: The S&P 500 closed at 1194, up .7%. Resistance at 1190 was finally breached. The broad index crossed 1190 eight times today. Over the past few days it has repeatedly fought in and out of this battlefield resistance level. A hard fought battle like this is good chart action. Yield on the 10-year note was down today. It is retreating down away from 3.95%, so this resistance level is holding firm, good news.
Fundamentals: The short confession season is over and the long earnings season starts on Monday. The confession season is usually a very accurate predictor of the earnings season and since this confession season was about twice as strong as historical norms it is a safe bet that earnings season will also be very good. Nobody cares. The market is going up and down based on the prospects of Greece getting bailed out. Today the news (rumors) is that Greece will get bailed out after all; hence the rally.
Geopolitics: The government of Kyrgyzstan was overthrown two days ago by pro-democracy rebels. The rebel’s interim government has control over the army and the northern part of the country. It has only spotty control over the south and some parts of the national police force. The ousted president is holed up in the south, trying to gather enough firepower to start a civil war and retake control of the country.
Kyrgyzstan is sharply divided between the south and north. The south is poor, agrarian, Islamic, anti-Russian, and anti-democratic. The north is wealthier, industrialized, anti-Islamic, pro-Russian, and pro-democratic. The interim government is pro-American (since it is pro-democratic) and pro-Russian at the same time.
America’s gigantic Manos air base is in Kyrgyzstan, the most important supply base for the Afghan war, vital to the war effort. Russia also has a big air base in the country, which it is now reinforcing with elite troops. While the Kyrg. government was being overthrown, Russia and America were busy signing the new START treaty, marking the beginning of a proto-alliance. A full scale civil war will erupt in Kyrgyzstan unless Russia and America work together, a test of the proto-alliance. If the two great powers pass the test, it will be bullish; if not, very bearish and here’s why: Aborting the embryonic Russo-American proto-alliance will push Iran and Russia back into each others’ arms, shut down the flow of supplies to the USMC as it starts the big offensive in Kandahar, and heat up the already hot Islamic insurgency in Russia’s Caucasus region.
Specific Stocks: Don’t count your chickens before they hatch. Boeing thinks it is waltzing away with the $100 billion Air Force refueling tanker deal. EADS (A.K.A Airbus) is getting ready to put together a new competitive bid after its last one was shot down. The financial press reported that the Boeing proposal was favored over EADS because Boeing’s planes would be cheaper (dummies). As you will recall, this newsletter reported that Boeing’s proposal was actually favored because it featured superior anti-missile capability against Iran. In preparation for its new bid, EADS is talking to Raytheon (RTN) about forming a partnership and designing the new tanker together. Boeing is very good at anti-missile technology. Raytheon is better than Boeing. Raytheon is better than anybody.
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