Scanning the World Into Quarter-End

It's one of those days in the big city, the type of weather one prefers on a Sunday when you can stay in bed and watch football. It's not enough that it's dark and rainy; with the temperatures in the mid-seventies and 93% humidity -- and October peeking around the corner, no less -- you get the feeling these days are far from normal. Art imitates life, or the other way around... strange days indeed. We find ourselves in an all too familiar trading Hades, where bad news is good news given the widespread anticipation of QE2. Once upon a time, annualized GDP of 1.6% during a "recovery" would be deemed anemic but not today, not with the heavy hand of the government at the ready. Toss in quarter-end and the percolating sovereign situation overseas and you've got yourself the makings of an emotional, reactive, and tenuous global environment.

(To read Josh Lipton's article about whether there's a gold bubble, click here.)

Back in February, we penned A Five-Step Guide to Contagion which mapped the psychological continuum of denial, anger, bargaining, sadness, and acceptance. That was, of course, on the heels of our Ten Themes for 2010 which discussed, among other things, the notion of European Disunion. I would venture to guess we're in the meat of the progression as it pertains to the first column and the heat of aggression with regard to the second. Remember, this ongoing crisis evolved from the financial realm to an economic reality to the social sphere. It, for lack of a better analogy, went airborne. You couldn't tell from looking at the tape, which highlights the important distinction between the economy and the stock market. I'm reminded of an interview I did at the end of 2006 when I was asked what worried me most. My response was that the Dow Jones was at all-time highs but nobody really felt like we were at all-time highs.

(To see Lawrence G. McDonald's view on the move to DEFCON 4, click here.)

No Such Thing as a Sure Bet I learned an expensive lesson in 2003 and it's one I remind myself of often; the powers that be are powerful indeed. This dovetails into another common theme this year -- The War on Capitalism -- and it's a dynamic we must respect. If you doubt for a moment the resolve and tenacity of the folks sitting on the other side of the table, ask a few of the savvy seers on Wall Street who have chosen to channel Sun Tzu and Ayn Rand. They've gone dark, and for good reason.

(To view Keith Jurow's position on strategic defaults and the US housing market, click here.)

So yes, it's hard and no, it's not your fault. As with anything in life, however, it's not what is that matters, it's how we react to it -- we must play the hand we've been dealt. Through that lens, S&P 1150 remains the near-term level of lore and the animal spirits want the market higher; we do, after all, live in a finance based economy. The VXO, the master betas (Baidu BIDU, Google GOOG, Apple AAPL, Amazon AMZN), commodity volatility, and financial shares should continue to hold valuable clues -- which reminds me, has anyone else noticed that Deutsche Bank DB is 20% off its August highs?

To read the rest, head over to Minyanville.