Best of the Net - Wed/Thurs September 24/25

Volatility is still the name of the game in the US and most foreign markets, even though they have made a violent rebound from last week's lows. The elimination of short selling does not appear to be having the desired effect of instilling confidence in the markets. Any market participant could have predicted this, but apparently this common sense was not so 'common' amongst market regulators the world over.

Having said that, and knowing that one cannot 'legislate enthusiasm,' I would be remiss to not point out the extreme negativity in sentiment that usually marks intermediate term bottoms. When the words 'financial Armageddon' are used frequently, you know sentiment is getting extreme. Additionally, with the US and Canadian campaign trails heating up, one can expect all sorts of asinine promises for certain industries from desperate candidates. What else is bullish? The absence of important Q3 earnings releases for a few more weeks. And of course, the daily barrage of 'happy thoughts' from US legislators.

I'm probably more 'net long' than I have been in a year, but I don't foresee that to be the case for more than a week or two. And any of a number of potential catalysts could change my position on a dime. Caution is still the name of the game.

Meanwhile, economic fundamentals continue to deteriorate to little fanfare, as talks of the big-kahuna bailout consume the minds of investors. Paul Kasriel points out some of the terrible releases that have been filtering in.

Todd Harrison posted a good article focusing on the big picture and outlining the tug-of-war between hyperinflation and deflation. Indeed, the powers that be desire the former, but are their guns big enough to do it? The article is appropriately titled, "Shock and Awe."

Mike Shedlock has made it his personal mission to ensure this bailout does not happen. I applaud him for taking the time to do so and encourage my readers (esp. those Stateside) to visit his site and follow his instructions on how to help.