Cognitive dissonance - may be the best way to describe the week's 'theme': a time when the world unites against 'Islamic Extremist' Jihad, led by ISIS as well as other fundamentalist fanatics and retards; a time when the Russian Air Force outshines a year of apparently 'selective' bombing by the U.S. (perhaps because of Saudi pressures not to lean too heavily on IS until Assad was done as seems to have been the modus operandi, a defunct strategy if that turns out to be the explanation); while now that ISIS finally made (from their perspective) a colossal miscalculation by first downing a Russian commercial airliner, then hit one of the most beloved cities on Earth, which finally compels the reluctant (or at least our leadership of the) United States to better-engage in the World War which is being coordinated by France now, and militarily led by Russia. 

The further 'straw' in the wind happens to be the FOMC Minutes; which I'll tend to focus on in tonight's video, rather than here. But even there, a between the lines interpretation reveals why the market managed to shrug-off what might in normal times (less debt levels) imply bonds and stocks performing inversely. 

First, Paris. Congrats to the gendarmerie and French Army for persevering the overnight fight, which 'may' have nailed the ringleader of the vermin cell. At the same time exposing a separate cell said intending to attack the large shopping mall (La Defense area) tomorrow. And no, taking down terrorists does not give the enemy a recruiting tool, neither does minimizing risk by being selective on who gets into your country, or this Country. (The comparison with the St. Louis passenger ship turned away by a somewhat antisemitic United States back in 1939 does not apply; because Jews or anyone fleeing the Nazi's wanted mere survival at the time; they certainly didn't come to the US to undermine or attack as is the concern surely not of the majority, but a legitimate worry that already has been proven by events in Europe.) Paris is tense; but will survive; and the camaraderie between Western European nations is incredibly solemnly strong, such that I'm optimistic as before, that the European Union will become closer not fragmented, as a result (regardless of temporary security transit needs).

Finally, global trade has lagged the tepid pace of expansion for several years; and is not improved, contrary to statements. Now Blackwater follows the lead of Bridgewater, and closes a large hedge fund, which is somewhat telling after heavy losses. From our perspective, regardless of difficulties with this rebound extension (more a short-squeeze than an investment move), it sure pleases to have mostly nailed key declines; and avoiding investing in a year that has not been kind to most money managers; some of which are seriously down and a slew of others are heavily leveraged still, and at-risk should things break. 

In sum: the risks are not mitigated; just celebrated by virtue of some hope the Fed either won't or will limit moving to firm rates next month. That's how you'd get strong bonds, stocks, with fairly neutral oil and defensive gold, along with a punch upgrade of Apple, primarily to buoy the Index, I suspect. Most financials are in trouble if there's anything more than 10 bp rate rise; so that's part of the 'relief' that went on, aside the obvious behavior.             

Daily action - made it clear as the day evolved that the declining-tops pattern (or trend-line) of the S&P was coming-out. We already knew the rebound was targeting first the 2050's then the 2070's; as those were the support skirmishes on the way down; hence the resistance areas on the way back up. Now they'll want to hit 2100, and try to convey another all-clear, which this likely is not. It's a relief rally combined with a short-squeeze, mostly on the FOMC footnotes as they imply economic deterioration since the last meeting(s) which Bulls like. 

Of course that's the Japanization of monetary policy, which tries to keep things together without real economic progress or reduction of debt or derivatives. So we'll hope that's not the case, but increasingly it looks like the Fed is actually quasi-admitting the box they cornered themselves into; and so managers for the moment have a sense of relief. That's likely just for the moment. 

We are concerned that the 'War' very much concerns the United States now. If reluctantly, expect Obama to return to the U.S. after Paris (Climate Meeting as will not be called off, nor should it be) and receive visiting President Hollande, with a further commitment, lest we actually allow a Russian/Iranian 'crescent' to establish hegemony of the Middle East once this all sorts out. If indeed the 'plan' was to hit ISIS, but not too hard, and to attack more fiercely after 'they' defeated Syrian forces, that's probably what analysts meant by Obama trying to 'threat the needle' with a risky policy there; and now that unwinds. Nobody truly trusts Russia; but in this instance they (with their own agenda ultimately we're sure) are clearly engaging ISIS, even if they were doing otherwise prior to the Jetliner bombing. Again, this avoids the US and Russia clashing, and it allows France to bring us all together to fight the common enemy, which is: 'Islamic Extremist Jihad Islamism', led by, but not exclusively, ISIS. 

We're flat overnight, indicating today there was no 'absolute' limit to a squeeze of this type, especially if they took-out the declining tops, at least temporarily. Flat overnight, we'll view the behavior in the morning; and remind that there's no precedent for this strong an equity market with so weak earnings and GDP prospects for the foreseeable future; not to mention conflict risk.