Getting Hotter

Charts: The market was up modestly in weak volume today because US exports came in much stronger than expected. Today's action marks the beginning of the fourth rally attempt within an ongoing correction. The rally attempt needs consolidation and a follow through day to become a technical rally.

Fundamentals: The most recent GDP figures show the US economy growing at a 1.8% annualized rate. Two thirds of that growth came from a build in inventories. Real Final Sales (no inventory distortion) shows growth of only .7%, which speaks to a double-dip recession looming. However, GNP (Gross National Product) grew at about 3%. GNP (as opposed to GDP) captures growth of American companies abroad, the money stays abroad because of the bizarre US tax code, good for shareholders but not Joe Sixpack. Today's export data and the GNP/GDP data tell us the US economy is super weak, but emerging markets are relatively strong. Neither can take oil prices at current levels for an extended period. Which, as always, takes us to the Long War.

Long War: The New York Times says there is a massive and secret US bombing campaign against Al-Qaeda in Yemen. The campaign involves drones and fighter jets. The Times says there is a huge CIA presence in Yemen. This helps explain the ongoing and savage ground combat against the Yemeni towns that Al-Qaeda has taken over. Also, there is hard evidence that the NATO campaign in Libya is more reliant on the US than the Obama administration is admitting, which is pissing off the wackos in Congress. So the picture Obama has been painting of a total tail tuck in the Long War is misleading. The President is trying to buffalo his liberal base. This is reassuring on one level but it also sends the wrong message to the bad guys. The big issue is the Afghan troop draw down in July. 5000 troops or less removed is bullish. More than that will be bearish. If Obama is that scared of his liberal base, then we have grounds for concern.

Nevertheless, the Long War is burning red hot. NATO fuel tankers are routinely getting torched in Pakistan. This is so bad NATO is ready to open supply routes through Russia. Experts now say the Al-Qaeda mastermind, Kashmiri, who was supposed to have been killed by CIA drones is alive and well. This means the ISID (ISI Dirt) is still running amok.

Look at the periphery of the Long War: In Nigeria Islamic terror strikes are back in vogue. Russia says that Al-Qaeda has established a big presence in Chechnya. And finally, Iran is sailing attack submarines into the Red Sea to harass Israel. Put on your Kevlar vest because its getting hot out there.