Well let's see now...

Oil over $80
Employment reasonable (if slowing somewhat)
Consumer Confidence (if you listen to the 10:00 AM report Friday) was ok
Retail sales reasonable
Business spending reasonable

Rate cut? Hmmmmm... me thinks maybe not.

And Bucky thinks maybe not too. Think he's sending a signal - "you cut rates you stupid bastard and the inflation monster is going to come out of the closet and eat you"?

I think so.

And by the way, unlike the monster that you thought was under your bed when you were a tyke - this one is real!

So where'd this attempted rally back come from? The XLF - Financials. Heavy volume showing up at about 1:30 CT - one good spike, but it was sufficient to lift the SPX.

Justified? Hmmmm... me thinks not. But that's not my decision - that's the choice of buyers and sellers in the market, and the market says "yes" - for today.

Ok. Let 'em get a nasty surprise. This smells like a lot of people are pretty confident that the broker/dealer earnings this week won't be a complete bust, and the PPI won't come in hot tomorrow morning.

What if either of those wishes turn out to be just that?

Got a Hard Hat?

Will rate cuts help? No. Consumer mortgage rate resets will still happen, and will still reset up. MEWs are still over, as house prices are coming down or remaining stable at best. Take the hundred billion a year out of the consumer's pocket that this will remove with absolute certainty and then tell me how it all works out ok..... I'll be waiting for that one.

So what's to like here going into tomorrow? Absolutely nothing, and Equities appear to have priced in two "realities", both of which cannot be true at once:

• The economy is slowing and a recession is coming but The Fed will save us.
• The economy is just fine but The Fed will save us.

The prescription for a coming recession would indeed be rate cuts. But - the prescription for the economy being fine but rapidly rising commodity prices is actually rate increases, because the key there is that with commodity price increases you get inflation, which inevitably shows up in everything, and once that cycle starts to get out of control it is very difficult to shove back into the bottle.

So which is it?

This spells huge disappointment, and considering that the entire retrace of the plunge in August has been on the back of "The Fed Will Save Us", this one could be epic.

Oh, and over in England? They've got a full-on run on the bank over there with Northern Rock! But its all contained eh? Honest? Hmmmm..... yeah, its contained all right - to the Planet Earth!

Price action today? Down, but muted. Volume was extremely light - lightest of the year - nobody's committing anything in front of the Fed tomorrow. Lots of "burn 'em" games in both directions but no follow-through either way. It was quite amusing to watch, actually, as the market see-sawed backed and forth. Difficult to make money on though because the moves weren't big enough to really generate a good profit, but it did give me a decent place to stick some collars on, so heh, the purpose of the day was served.

Tomorrow, something violent this way comes, and we'll have economic data to go with it in the morning. Oh boy.