THEME: BEHEADINGS & BEARISHNESS
Today's sell-off is a bit of mystery. Sentiment has shifted to fear. Volumes are not great. The ten year broke 4%. Fannie Mae may be a fraud. Oil keeps going up. The beheadings in Iraq (and murders of Italian women) are just too brutal for words.

We are on a knife's edge.

I think that the market will have an attempt at a rally. If it rallies in the morning then selling longs and hedging is the right response. The stronger the apparent rally and earlier it is, the worse the sell off will be in the afternoon.

What the market is sensing is that the enemy is being underestimated yet once again. Al Qaeda influenced the Spanish election. Surely, they have plans to disrupt this one. Does horrific brutality benefit Bush? Not if we start blaming him for all of this mess. And it is a sad and ugly mess.

Here is an excerpt from a Christian Science Monitor article:

Inside dusty, barricaded camps around
Iraq, groups of American troops in between missions
are gathering around screens to view an unlikely
choice from the US box office: "Fahrenheit 9-11,"
Michael Moore's controversial documentary attacking
the commander-in-chief.

"Everyone's watching it," says a Marine corporal at an
outpost in Ramadi that is mortared by insurgents
daily. "It's shaping a lot of people's image of Bush."

The film's prevalence is one sign of a discernible
countercurrent among US troops in Iraq - those who
blame President Bush for entangling them in what they
see as a misguided war. Conventional wisdom holds that
the troops are staunchly pro-Bush, and many are. But
bitterness over long, dangerous deployments is
producing, at a minimum, pockets of support for
Democratic candidate Sen. John Kerry, in part because
he's seen as likely to withdraw American forces from
Iraq more quickly.

"[For] 9 out of 10 of the people I talk to, it
wouldn't matter who ran against Bush - they'd vote for
them," said a US soldier in the southern city of
Najaf, seeking out a reporter to make his views known.
"People are so fed up with Iraq, and fed up with
Bush."

With only three weeks until an Oct. 11 deadline set
for hundreds of thousands of US troops abroad to mail
in absentee ballots, this segment of the military vote
is important - symbolically, as a reflection on Bush
as a wartime commander, and politically, as absentee
ballots could end up tipping the balance in closely
contested states.

It is difficult to gauge the extent of disaffection
with Bush, which emerged in interviews in June and
July with ground forces in central, northern, and
southern Iraq. No scientific polls exist on the
political leanings of currently deployed troops,
military experts and officials say.