Since the war began via an attempt to behead the regime with a precision-guided strike at the Iraqi leadership, the operative question for everyone watching is simply: Where’s Saddam?

The U.S. would like to know; Did we get lucky with our 1st attempt? If not, we may want to take another stab at it.

His ministers would like to know; The brave faces they put on while reading statements allegedly written by Saddam reveal that they have no clue where he is.

The Iraqi Saddam Fedayeen want to know; Without Saddam around, their world collapses. If Saddam is dead or gone, what is the point of their suicidal battle? With Saddam gone, the Fedayeen would need to get out of Dodge.

The Iraqi people would like to know; They fear supporting the U.S. troops if there is the slightest chance that the horror of Saddam returns; They relied upon the U.S. last time when rising up against Saddam – and got slaughtered.

The so called Arab Street wants to know; Anger at the “infidel invaders” has elicited a swell of Arab Pride, though quite frankly, its hard to imagine what there is to be prideful about; Are they please by the benevolent rule of Saddam? Perhaps it’s the way his troops have defended the motherland by hiding in Mosques and children’s playgrounds and hospitals, whilst wearing women’s clothing and falsely waving white flags. Perhaps their pride stems from the region’s contributions to progress over the past 500 years.

Lastly, Mr. Market would like to know. He’s been careening between elation and despair, depending upon the latest headlines. Two weeks ago, he was ecstatic in his assumption that the war would be a cakewalk. A few days ago, he was in the throes of despair, having convinced himself that the war would slog on for months; As of 5 minutes ago, the latest intel suggests the war will last a matter of weeks – our boy has put on his party hat.

Despite – or perhaps because of – the Saddam question, it pays to look into the Mr. Market’s internals: Most noteworthy is that Monday’s lows represented a ~50% retracement of the initial war rally; A market up 13% in eight days is way ahead of itself, and a healthy pullback sets up a more sustainable ascent. A 50% retracement holding shows that buyers have conviction; Had they not shown themselves, a retest of the lows would have been likely. Investors buying after prices were pushed that far back suggests that the market has a established a short term bottom. If buyer’s fail to materialize on a 50% pullback, than a retest of the lows becomes likely.

The lows from Monday are your new stop losses.

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Quotes: “”Superiority of numbers is the most common element in victory. . . . Superiority . . . can obviously reach the point where it is overwhelming. . . . It thus follows that as many troops as possible should be brought into the engagement at the decisive point.”
-Prussian military theorist Carl von Clausewitz

Category: Finance, War/Defense

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