Have you ever heard that joke about Pinocchio's girlfriend screaming, "Tell the truth; tell a lie! Tell the truth; tell a lie!"?
That's how investors must feel as they watch the stock market gyrate. Eat your heart out, Charles Dickens - this is our time. In an admittedly oversimplified attempt to help navigate the financial landscape into year-end, here are five themes to keep an eye on:
The dollar: Minyanville has asserted the notion of "asset class deflation vs. dollar devaluation" for the last decade: In short, if the U.S. dollar rallies (against other currencies), we're hard-pressed to see stocks trade higher.__
Gold: The declines in the yellow metal last week during the equity rallies were an ominous sign heading into this week. Commodity volatility typically precedes equity movement, and gold is 20% off its 2011 high. __
Russia: This catalyst may well be "The Red Swan." Russia is down 35% (from the highs) this year as electoral protests persist and social mood sours. Economic hardship is a historic precursor to global conflict, and we need to keep an eye on the former Soviet Union.__
Political will: The presidential election is still a year away, but the political posturing is in full swing. With Democrats and Republicans increasingly focused on "what might be," the "what is" might suffer as a result. The stock market - which is the world's largest thermometer - will measure this in kind.__
Europe: I know, you've had it up to here with Europe already - me, too! Still, the bar tab for a massive amount of European debt is due early next year, similar to the set-up in August 2008, and the stock market is a forward-looking discounting mechanism. As Mark Twain famously said, history doesn't always repeat - but it sometimes rhymes.
Todd Harrison is the author of “The Other Side of Wall Street” and the founder and CEO of Minyanville, an Emmy Award-winning financial media platform. Read him daily at www.minyanville.com.