• We'll get an important currency indicator overnight.

I hope you enjoyed our day together on the Diary! The always entertaining Tim Collins will be here tomorrow, so be sure to tune in.

If you're a currency trader, or if you just happen to be awake at 4 a.m., be sure to check out the German IFO Business Climate Index. This indicator is very closely watched, and it could influence the U.S. open.

Have a great evening.

• Oil stays flat, and military contractors sell off hard.

Not surprising that stocks sold off as a military intervention now seems more likely, but oil never did bounce, and military contractors General Dynamics (GD) and Lockheed Martin (LMT) sold off hard into the close. That's not the type of reaction I would've anticipated. Most indices closed near their lows, and despite the late-session selloff, the overall volume was very light.

Also, Bill Ackman is apparently unloading the remainder of his J.C. Penney (JCP) holdings. Could this be a turning point for J.C. Penney? The long-term chart still looks weak, but over the past two weeks the stock has emerged from an oversold RSI reading and has been quietly creeping higher. With a stop under $12.30, it's a low-risk trade.

• More than meets the eye?

One more point on this afternoon's market selloff. Gold and silver are rallying, but oil hasn't joined the party yet. If this truly is a reaction to impending military action in the Middle East, we might expect a bit more from oil.

Also, military contractors like Lockheed Martin (LMT) and General Dynamics (GD) are selling off with the general market. Bottom line: Syria is the obvious answer, but perhaps there is more to this than meets the eye.

• The stock selloff finally moves onds and the dollar-yen trade.

Initially, there was no reaction in the bond market to the sudden selloff in stocks, but after waiting for 10 minutes, bonds began to rally. This tells us that bonds didn't lead the charge. However, there was no such delay with the USDJPY currency pair, which dropped hard in tandem with stocks.

That doesn't necessarily mean that there is a problem or situation involving Japan; the yen tends to gain when stocks fall, and it is a so-called "risk-off" currency. This tends to be true regardless of the cause of the markets' concern.

• Volume spiked after Kerry's speech.

Obviously, markets are not reacting well to the war drums from Washington. The five-minute bar that closed at 3:15 had the highest volume of the day, including the open. The last two five-minute bars were over 4x average volume for the past 50 bars. That's very unusual activity for late August.

• Looking at 1680 on the S&P.

I'm just back from a week at the beach and other than a holdover short position in the iShares Barclays 20+ Treasury ETF (TLT), I'm as flat as a pancake.

I'm not in a big hurry to dive back into the game because it's always been my philosophy to allow the market to figure itself out and then participate. We're now approaching a key inflection point and I want to see how the market behaves when it gets there.

One the one hand, you have an economy that appeared to be on the mend, but once again seems to be sputtering. If last week's new home sales figure wasn't sufficient evidence of this, today's durable goods figures drove the point home.

On the other hand, we have a Fed-fueled stock market that just won't quit. Fed Chairman Bernanke doesn't want this market to fall because of the wealth effect that a rising market creates.

The question is, how relevant is Bernanke? In less than 100 days, it'll be December and he will have started his next-to-last month as Fed chairman. If he isn't regarded as a lame duck right now, he certainly will be by then. Most of us believe Bernanke will taper in September -- my guess is by $10-15 billion per month -- so that has to be priced in to an extent.

When the S&P 500 gapped down hard on Aug. 15, it created a resistance level near 1680.That's only about a dozen points away. There's no way I can become bullish again if the index fails to break above that level, represented by the purple line on the SPY chart.

SPDR S&P 500 (SPY)

Source: TradeStation

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I'm also playing conservatively because I'm in the midst of a good quarter. The beginning of July clearly signaled that the next leg up was upon us (green arrow), so I got long and stayed that way until 1680 broke on Aug. 15 (red arrow). I don't intend to give those profits back, so I'm going to tread lightly until the SPX either breaks above 1680 and pressures the shorts or proves it can't pressures the longs.

• It's been greatly exaggerated.

Despite the many prognostications of its demise, the bitcoin refuses to go away. In case you missed it, Germany now recognizes -- and plans to tax -- the virtual currency.

Here's an article from The Guardian that explains Germany's new stance on bitcoin.

I wrote about bitcoin back in April, when it was hitting all-time highs. My stance is neutral, as it's my desire to remain objective about a topic that is strangely emotional for many.

Soon after, the virtual currency plunged. But now it's slowly trending higher. Last week, bitcoin reached its highest level in nearly three months and the chart appears to be forming a V-shaped bottom. I believe Germany's characterization of bitcoin as a "unit of account" is a positive development for bitcoin bulls, as it lends credibility to the fledgling currency. 

Bitcoin

Source: Mt. Gox

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• Where are the key names headed next?

I'm observing the action in fertilizer stocks and I can see from the comments section that many of you are as well. Let's chart some of the key names in this sector to see where they are headed next.

Let's start with Potash (POT), which broke down from a massive descending triangle one month ago. The stock appears to have formed a double-bottom pattern, a bullish indication, but most interesting is the huge gap. Any close above $31.90 could open the door for a move to $36, which would be my target. 

Potash (POT)

Source: TradeStation

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This gap is significant because POT hasn't traded between $31.90 and $35.98 since August of 2010, a full three years. I'm sure there are a few banks and brokers who'd love to see the stock trade within that area, as it may be rich with unfilled orders.

In comparison, Mosaic (MOS) possessed a healthier chart prior to a similar plunge. Notice how the descending triangle is missing from this chart, replaced by a series of higher highs and higher lows. I'd buy MOS above $43.90 with a target of $52. The two charts are very similar, but if I had to choose between POT and MOS, I'd take the latter.

Mosaic (MOS)

Source: TradeStation

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Finally, I spy a cup-and-handle in the CF Industries (CF) chart. A break above $207 targets the YTD high near $230.

CF Industries (CF)

Source: TradeStation

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• Let's update the chart.

A big reversal in emerging currencies was spurred by the announcement of a massive $60 billion intervention program by Brazil's central bank late last week. It was Brazil's finance minister, Guido Mantega, who coined the term "currency war" three years ago. That term refers to the intentional weakening of currencies, but ironically this action was taken to strengthen the plunging Brazilian real.

I explained the significance and the inherent dangers of the dive in emerging currencies here on Real Money Pro last week.

Now let's update that chart, which depicts the U.S. dollar vs. the Indian rupee, Brazilian real, Indonesian rupiah and Malaysian ringgit:

The Brazilian real (red) had lost 20% of its value vs. the U.S. dollar over a three-month period, and then reversed dramatically after the intervention announcement. This is actually good news for the global economy and stock markets. If you recall the Asian financial crisis of 1997, you know that U.S. stocks plunged due to what started as a minor currency crisis in Thailand.

Now compare Thailand to Brazil and India, which both rank among the world's ten largest economies according to the World Bank and you can see the potential for trouble. Hopefully, that trouble has now been averted, but if the intervention fails the potential for a crisis will be even greater than before. That's because markets will have lost faith in Brazil's ability to stabilize the real and that failure will be seen as an invitation to traders everywhere to short the Brazilian currency with impunity.

• Core is most troubling.

The headline figure was -7.3%, worse than the expected -3.0%. The core (non-transportation) figure was less troubling, falling 0.6% vs. expectations for a gain of 0.6%, but still indicative of falling demand.

Often, a soft durables number can be glossed over because of acute weakness in one sector. But in this case, a broad-based decline in demand appears to be the culprit. Orders for non-defense capital goods fell 3.3%, which bodes ill for the U.S. economy going forward.

This calls the entire economic recovery into question and the housing recovery in particular. New home sales missed by a wide margin last week and the sale of homes (both new and existing) spurs demand for durables as well as other goods and services.

• Return of a legend.

While away on vacation, I was very pleased to hear of the return of a legend to TheStreet.com. Herb Greenberg is back, bolstering a formidable roster of talent that some might describe as the 1927 Yankees of financial journalism.

I've been fortunate enough to interact briefly with Herb a few times at CNBC headquarters. On those occasions, he was always the consummate professional, both on camera and off. He is a legend in this business and his unique brand of investigative journalism revolutionized the industry. As is the case with Jim Cramer, Stephanie Link and, of course, Doug Kass, it's an honor to appear on the same page with him.

Welcome back, Herb!

• It's an honor to fill in for the one and only Doug Kass here on the Diary.

Here's what's happening:

Futures are offered slightly lower in early trading. Metals are consolidating gains after last week's torrid rally.

Onyx Pharmaceutical (ONXX) agreed to be purchased by Amgen (AMGN) for $125 per share. The company rejected the suitor's $120 per share offer back in June. This shapes up as the fifth-largest biotech deal in history.

Durable Goods Orders will be released at 8:30 a.m. ET, with analysts anticipating a drop of 3.0%. The core figure, which subtracts transportation goods (generally autos and airplanes), is expected to rise by 0.6%.

Not much to speak of on the earnings front. Later this week we'll hear from Joy Global (JOY), Tiffany (TIF) and Salesforce.com (CRM).

If you're involved in currencies, be aware that today is a Bank Holiday in the U.K. About one-third of all currency trading activity emanates from London.

Last, but not least, keep in mind that this is the last week of August, so expect light volume. But a low-volume market shouldn't necessarily be equated with low volatility. In fact, thin markets can be extremely volatile due to a lack of participation.