This is it!  The week where the fate of the world is decided!  If your first thought upon reading that was to be skeptical, you're on the right track.  Still, there's a LOT going on this week and it has a lot of market moving potential.  While the plethora of data and events might not decide the fate of the world, and while big-ticket events don't always live up to expectations, this is certainly one of the most POTENTIALLY action-packed weeks of the year.  In fact, it would be a surprise to NOT see some big swings, especially in the last 3 days.

This is all a bit odd considering that we're in the middle of summer, a time not traditionally associated with big, meaningful market movements.  But if you've yet to fully grasp the fact that markets have broken with tradition, now would be a good time, not only because of the various "new normals" that are in play this week, but also because this week is the one year anniversary of a major shift toward the 'new normal' itself.

What does that all mean? 

It means that there was a time in the not too distant past where domestic bond markets tuned in to domestic economic data and could reasonably predict the direction markets would moved based on the results of the data.  Sprinkle in things like earnings, positional adjustments, month-end buying, corporate rate-lock selling, and various other structural considerations, and there seemed to be a decent enough order to financial world.  Some might even say that such things still matter (even us, when we're bored), and sometimes, this "stuff" does matter.  But other things matter more.

If the financial world is compared to Classical Myth, then the standard slew of data and events could be thought of as the world of mortals.  Things like NFP and FOMC Statements would be like the Gods on Mount Olympus and a Euro zone collapse in addition to unconventional domestic Fed policy would be like the Titans.  In short, the concerns of mortals are all but an afterthought.  Now is the age of Titans. 

Now is the time where the largest-scale concerns dominate the trading landscape, with most everything else merely trickling down as necessary byproduct of the epic events and eventualities.  Chiefly, we're dealing with the ongoing potential for a complete collapse of the Euro zone.  What might seem like relatively trivial day-to-day happenings are in fact being interpreted as having a minor encouraging or discouraging effect on that broad collapse.

There's a great deal of "collapse" priced in to current trading levels.  So when ECB Pres Mario Draghi last week spoke boldly about doing whatever it takes to preserve the Euro and followed it up by setting a meeting with the head of the German central bank (key opposition to Draghi's bigger aspirations), it might seem like just another rhetorical rant, but markets traded the potential for renewed bond-buying as an action that would bring the Euro zone slightly farther away from total collapse.  In other words, it's not about the actual economic impact of day to day economic events, but rather, it's about measuring how much of an impact they have on the likelihood of Euro zone collapse.

We've been saying the same thing about FOMC policy with respect to the US for quite some time now.  But instead of the day to day to day economic events impacting a Euro zone collapse, we're interested in measuring the impact they could have on the FOMC's decision to conduct additional QE.  In other words, that lackluster piece of employment data or that better-than-expected manufacturing report... we don't care what sort of fundamental suggestion they're making about economic activity, we care about how likely they are to help shape the Fed's decision to QE3 or not to QE3.

So those are the titans: Europe (where the current big question can only be answered by an ECB policy announcement) and the prospect for unconventional Fed policy.  Still visible are the olympian gods such as The Employment Situation Report and the rest of the FOMC Statement.  Then you have the "mere mortals," who sometimes act boldly enough to impact events for the gods and titans such as ISM data, Personal Consumption data, regional PMIs, and the ancillary employment reports.

And we get ALL of those this week!

After a busy day of domestic data on Tuesday and Wednesday morning, the FOMC Announcement hits on Wednesday afternoon.  There's a chance we'll see something new in this one and a chance that we'll just get an even more austere tone with even more anticipation pushed to the September meeting.  The next day we'll get the ECB rate decision that will reveal whether or not Draghi will back up his enthusiastic speech with enthusiastic actions.  Even if he can't convince the German central bank to give ECB bond-buying the green light, he has to do SOMETHING otherwise no one will ever care in the future if he tries to say something to soothe markets.  More importantly, if the ECB does nothing, there could be serious, immediate consequences for credit spreads in Italy and Spain, thus necessitating some form of emergency action even if it's not included in the ECB policy announcement.  This essentially guarantees we'll see the ECB do as much as they can do at this meeting.

And then on Friday, we'll get the Employment Situation Report.  It's too bad this one couldn't trade places with the FOMC announcement.  As it stands, it's result is slightly less meaningful considering that the Fed's QE3 position will just miss out on another good piece of information.  If NFP was just before the FOMC Announcement, we could more easily expect it to factor into a QE3 decision, but as it stands, a lot could happen between Friday and the next FOMC Meeting, thus muting NFP's usual impact just slightly (keep in mind that even a muted NFP can be a big market mover).

With all those epic goings-on this week, Monday stands in stark contrast.  We've obviously been given one day to catch our collective breath and prepare for the potential activity later in the week.