This blog post originally appeared on RealMoney Silver on Nov. 29 at 8:30 a.m. EST.

Last week's economic news over here and over there presented a study in contrasts.

The Pros

On one hand, the trajectory of domestic economic growth has improved somewhat and is clearly on the ascent -- albeit from relatively low levels. While capital spending remains subdued and housing (plagued by mortgage-gate and a large phantom inventory of unsold homes) still resides in the basement, most indicators are improving -- including the regional district growth indices (Chicago's National Activity Index, Richmond Fed Manufacturing Survey and the Kansas City Fed Survey) -- the capacity utilization rate is well off its bottom, the ISM and ECRI's Weekly Indices are moving higher, personal income/spending growth is expanding, jobless claims/labor market trends are improving, inflation is quiescent, and other key barometers of expansion such as an upwardly revised third-quarter 2010 GDP of up 2.5% are better than consensus forecasts.

The Cons

On the other hand, the European economic theatre has deteriorated, and the lower demand and economic growth from the imposed austerity measures will present profit challenges to the many U.S. multinationals that serve and have an important presence in that geography.

Other wild cards? They seem recognizable, contained and controllable:

  • The Korean situation is a clear wild card and presents headline risk, but, in all likelihood, the crisis will be resolved before long and will not impact the markets.
  • China's growth rate is a short-term wild card for the markets, but, in the near term, I don't expect a surprise much beyond a slight deceleration in the country's growth rate.
  • Politics, too, looks relatively predictable. Gridlock is the likely outcome, as neither party has expressed a willingness to move to the center and compromise.
  • Nor does a major surprise appear likely from the Fed. Short-term interest rates are anchored at zero, and the Fed will move uninterruptedly on its stated QE2 journey.

The Uncertainties

Of course, there will always be a possibility for some exogenous events to upset Mr. Market's applecart, and a month from now, I will be issuing my annual surprise list, which will incorporate and allow us to prepare for some "possible improbables." But for now, I expect few meaningful and impactful market influences into early 2011, as the tension persists between the cyclical tailwinds of monetary stimulation and a pent-up, not spent-up, consumer vs. the secular headwinds of numerous non-traditional growth inhibitors (higher taxes; costly regulation; local, state, federal and sovereign fiscal imbalances; and other long tail risks from the last credit cycle).

The Conclusion

As for the balance of the year, I continue to stick by

my prediction

on "Fast Money" in early November that the

S&P 500

has already achieved its high for the year and that the previous peak of 1,225 will not likely be breached over the balance of the year.

When I look at the flip side and weigh the foreseeable positives with the apparent negatives, I conclude that, in the next four months (through the end of first quarter 2011), the domestic good news will put a floor under U.S. equities and the bad news, over there, will put a limit to the upside to stocks.

My guess is that the risk/reward has tilted slightly more positive based upon the strength of the domestic economy coupled with the several percentage point drop in the markets over the last few weeks.

The downside to stocks might be contained to the 1,140-1,150 area on the S&P, and the upside might be limited to 1,240-1,260 through the end of the first quarter of next year. While the downside and upside predictions are revisions from my previous expectations, this is still a relatively narrow projected trading range, with a downside risk of 3% to 4% and an upside reward of 5% to 6%.

While producing limitations to the breakdown risks and dampening the potential for breakout opportunities, this should be a fertile environment for stock pickers and traders.

Accordingly, in the Mexican standoff I expect, you can look for more of my normal macro commentary to be complemented by a growing list of specific company/industry long and short ideas on The Edge in the months ahead.

Doug Kass writes daily for

RealMoney Silver

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Doug Kass is the general partner Seabreeze Partners Long/Short LP and Seabreeze Partners Long/Short Offshore LP. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.