The Stock market is officially in unknown territory and that is making a lot of investors very nervous.  There is so much money waiting to pounce on a sure bet recovery that the market has been starved since last year of much of the needed capital for a real recovery.  Not to mention that the recovery cannot take place in earnest until jobs are once again created in the US, but that’s another matter for another article.  The issue that many investors are having is not a matter of confidence; it’s a matter of life or death.  Will the commercial real estate bubble burst and drag the rest of the US economy down with it?  Will the fragile recovery that we have seen so far extend into 2010 and generate real growth and real wealth for more than just a few key players?

The recent spat of mergers and acquisitions has given the late September-early October market a little more momentum in recent days, but this cannot last.  October is traditionally a month where the stock market does not fare well, and those serious investors that know this historical fact can’t help but keep their money parked well out of reach for the time being.  Injection of new capital is not likely, at least not until there is some real, proven optimistic news coming from retailers.  These same retailers are also nervous, for a completely different reason.  If the holidays produce anything but spectacular sales numbers, the fickle recovery may be brought to its knees in early 2010.

The most recent set of earnings, which are set to be reported this week by many key retailers and suppliers.  Among them, Alcoa, has certainly seen better days, but has pulled out of last year’s death spin to recover about 30% of its value since March of 2009.  This stock might be a safe play had there been much positive news about infrastructure investment and home sales, but alas, there has been none of that as of late.  I don’t expect any real positive earnings information, and what may be taken as real positive earnings results can likely be chalked up to the injection of roughly 10% of the stimulus funds since March of 2009.  A real recovery is unfortunately not in the cards until at least the end of 2010 and even then, it may not be a full recovery if jobs cannot be reclaimed or created.  Without a low unemployment rate, the US economy can never really live up to its potential.

There are some really smart defensive plays in the stock market right now.  Many investors are once again flocking to short the markets and push their money out of harms way until the holidays are over and the economy has settled a little more into 2010.  Those with real foresight will see that commodities, including gold, copper, silver, corn, wheat, and oil are set to explode if the global economic recovery is stymied by hyperinflation or stagnated by a long, slow slog back to an economy balance.