Strong rally today. My basic trend index, which measures
demand vs supply in the market, has not yet turned positive
so I am on the sidelines. Geopolitical risk remains high,
although a significant short term component of that risk
will settle out if the cease fire holds in Lebanon.
Hezbollah did its jack in the box routine to unsettle Israel
and do some strategic damage as well. It has been a bust to
date. They failed to lure Israel in to a guerilla style
battle in So. Lebanon, hit Haifa but no other strategic
targets, and now face a 30K man armed force which will
take up residence south of the Litani. Iran has pumped
about $5 billion into this operation over the years and
when it really needed Hezbollah to distract Israel from
Iran's nuclear program, Nasrallah and the boyz flopped.
Iran may hold Nasrallah's tootsies to the fire in the days
and weeks ahead, as it plays out its own nuclear program
cards. So, Nasrallah may get another shot short term, which
means this situation could remain live.
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