THEME: TERRORISM
Today's terrible tragedy in Spain gives strong hints as to the market's complacency about terrorism. As I wrote last Thursday, terrorism barely registers any concerns with the market or with voters. In the morning, the terrorism report was not even the first item on NPR's news broadcast. The Spanish gov't's official finger pointing at ETA was swallowed whole by the market. In the past, the chatter about every terrorist event would be about the possibility that Al Qaida was responsible.

The fact is that the market does not want to go back to feeling bad.

That is why the market is unprepared for what is coming next. Technically, the SP trades very similarly to the March/April of 2002, right before summer's rout.

What may happen is that in a desperate attempt to raise election hopes, Bush & co. could try to trigger more terror alerts. Surprisingly, no terror alerts have been issued.

I think the market is in for a very difficult patch and the bear market will resurface.

TRADE IDEA: short GM/ buy TM