Last week's Associated Press headline said it all about this market: "Durable Goods Orders Plummet." According to the first paragraph, durable goods orders fell 4.9% in August, the biggest drop since January. It was not until the 10th paragraph that I found the number I was looking for: Durable goods orders ex-transportation. That was down only 1.8%. You see, the extremely volatile transportation component is dominated by orders for Boeing (BA) jets, which dropped 41% in the month. Unless you own Boeing, the transportation component just doesn't matter. But the mood out there is to provide the glass-half-empty perspective on every number that comes along, and try to scare you about a coming recession. Even before getting to the ex-transportation number, paragraph eight said: "Some put the chance of a recession as high as 50-50."

Well, I think "some" have put the chances of a recession at 50-50 every month for the last two years. I'm not sure what that comment adds to our store of knowledge, but it's an irresistible sound bite. When it comes to recessions, there are two really good predictors: The S&P 500 and the Economic Cycle Research Institute (ECRI). The S&P is within 2% of its all-time high. The Weekly Leading Index (WLI) growth rate from ECRI shows a soft patch for growth, but no recession. It fell from over 6% growth in June to under 1% in early September, but stabilized as it became obvious that the Fed would act. The ECRI said: "Following a plunge in August, WLI growth stabilized in early September, even before this week's rate cuts. Thus, a slowdown in economic growth is clearly in sight, but not a recession."

Also, one of the best concurrent indicators of real global economic activity is the Baltic Dry Index, which is the price paid to move freight on ships. It is skyrocketing to all-time highs, showing the intense demand for space to move goods.

But over 67% of Americans think that we are on the verge of or in a recession, according to a new Wall Street Journal/NBC News poll. Combine that with the scare stories about October crashes that are all around, and one wonders how the S&P can be so high.

And that is the point.

If the market is doing this well when fear is abundant, what happens when the fears go away? The most likely course over the next few weeks is a drifty consolidation between 1500 and the 1555 high, as we work our way through earnings reporting season. Then the Fed meets again on October 30 and 31, and either it's clear that the credit markets have unlocked, so they declare victory, or they cut rates another half point (50 basis points) to set the economy up for a strong holiday season. Either way, the S&P should move up 100 to 250 points by yearend, followed by another 100 to 250 points in the March quarter. That's a bull market.