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Jim Cramer: Pricing in an Impasse?

NEW YORK (Real Money) -- Could it be that the market is factoring in an impasse and just moving on? Could it be that stock traders actually expect one more failure and another round of Sunday talk show bashing? I think that has to be what's going on.

The pain of missing a rally this close to the end of the year after the rip-snorter we had last Thursday has become too great. The idea that you might be left behind after the inevitable initial rejection by Eric Cantor and John Boehner, despite the hideous poll tally for the GOP -- remember that includes all people not just the Republicans who vote in the primary -- is just too great. The risk is worse than the reward.

Now, a default will be ugly ... for a couple of days. But can the leadership of the GOP, playing an endless game of chicken, survive if there is no default? If the president is willing to give in on what is basically a stance that there should be no more debt ceilings, does that really mean anything to what now seems like a majority of the Republicans in the House that clearly want government to be made smaller now, no matter what the cost to the party in the long run?

So, what I think you are seeing in this market is a grudging recognition that we will go over the Oct. 17 deadline, but so what? That's what the rally in the banks and the retailers said yesterday, the two groups that will be hurt the most when it comes to earnings.

Now the bond market is playing the same game as the stock market. It's saying, "Look, there will be a default, but after that there will be a resolution and an end to QE2, so the bonds are going to sell off." I do not think this selloff is a flight to safety because there is no safety until we get a default and it is cured. Either that or the bond guys recognize that the October payments from income tax are going to be bigger than expected.

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