Although the timeframes that I trade these days have come in due to the heightened volatility - they are once again aligned with the underlying long-term trend. This is a shift away from my Short-term Scale outlined in June's notes. And despite the refrain in my head of, the times they are a changin - the trend that started in the early 1980's still remains in place on the global stage.

"Considering that in the past decade we have experienced our fair share of the boom and bust cycle, I like to look at a market that was not disproportionately weighted to those two sectors (technology & financials). The Russell gives you that view because of its micro-weighted slices across the broad economy. While although there were serious retracements in the past, the long term secular bull market is still alive. That is plainly represented in the long-term chart by higher highs and higher lows. You will find the same price structure looking at the MSCI Word Index.

I tend to stay away from the semantic debate over secular and cyclical markets, because in most instances they have allowed traders and investors dogmatic cover that typically wasn't warranted to the same degree they expected." From - Long-Term Scale

Why is this basic, yet essential, premise important for me today?

Simply put, my trading windows - as short as they may be - have gravitated towards the long side of equities, because I feel at these levels and considering the nature of the friction in the tape - there is an underlying long-term bid. If you look at where I have been trading from (trade transparency), the bulk of my recent gains have come from the long side of the ledger. After crashing in early August, the long side has been more than forgiving for active traders. Not surprisingly, volatility cuts both ways and the market continues to climb the now heightened wall of worry (some may call it a bear flag) in the spector of the ghosts of 2008. Suffice to say, and considering the convergence of the North American and Eurasian plates - it is now classified (geologically speaking) as a mountain-of-morosity.

I find it interesting, from a variant perspective, that so many are cynical of the idea that the global community, whether it is the BRICs or some other mixture of sovereigns, can put the fire out and restore confidence in the system. Certainly, it is far from outright altruism, as their own interests are at stake - but that has become a silver lining in the arc of globalization. Spread the interest of capital - and it will strengthen the signal response during a crisis. Don't expect it to act proactively - but it will arrive nonetheless - just not a moment sooner. There will always be those who simply will not cooperate because they don't perceive it is in the interest of their constituents or virtues. As I alluded to previously - the current situations long lost and private-school cousin is 1998 - and it too had institutions that failed to cooperate in the best interest of the system.

Do you remember Bear Sterns response to LTCM?

They abstained.

If Germany keeps up their posturing - in a decade or so they just may find a similar fate when the cards are stacked in a more compromising configuration.

So in the immediate sense - what are my expectations as we walk towards triple witching this Friday with the highest level of short interest since July 2009 and a global central banking community called into action?

Risk has shifted to the upside with a trip to ~ 1270 in the SPX over the next several weeks. You could see the bulk of gains in a session or three with any significant details shed towards the european debt crisis. From my perspective, the outlier risk now becomes a trip back towards 1100 before a resumption of the uptrend. In either case, I will continue to trade set-ups on the long side of equities as I perceive volatility will continue to come in as a broad base is established.

With that said - stay frosty.