Editor's Note: Combining his passions for the markets, humor and food, "What's cookin' with Kenny Polcari" is a blog published twice weekly on CNBC.com. With more than 30 years of experience on Wall Street, Polcari provides insight and analysis on the markets as well as a recipe du jour. Buon Appetito!
"Don't cry for me, Argentina" is exactly what investors are singing right now. All of this talk of default, technical or otherwise, only highlights the dysfunction in D.C. It really gives a guy a headache! We're all stuck watching this circus and it's like purgatory ... by the way, I have a recipe for Uovas in Purgatorio (eggs in purgatory) that's delizioso, but more on that later.
Anyway, all this drama does nothing to rattle investor confidence in the capital markets. It only creates opportunity for those willing to jump in. As the situation develops, the markets will reprice (maybe lower at first to account for the additional risk) and then move on. Investors know that.
(Read more: GOP proposes new 'supercommittee' to settle fight)
What makes this a bit more exciting is that prior budget standoffs have mostly been about cuts to spending, but this time the stakes are a bit higher as one faction of the Republican party is trying to single-handedly dismantle President Barack Obama's signature piece of legislation: the Affordable Care Act, or Obamacare. And that ain't happening, according to the president. Both sides are betting on a victory as they prepare for the 2014 midterm elections. And the world turns.
Global leaders are becoming uneasy. International Monetary Fund President Christine Lagarde warns that failure to raise the debt ceiling would damage not only the U.S., but the rest of the world, as well.
Even the Chinese are getting in on the act, demanding that someone please "take control" of the cuckoo's nest. Remember, they are the largest creditor to the U.S. (as of July 2013, they own $1.28 trillion in Treasurys) and thus have the most to lose in a default.
Chinese Finance Minister Zhu Guangyao rang the alarm bell and reiterated that their Treasury position gives them the right to demand resolution. I mean, can you imagine the outrage in this country if we come to a technical default and pay interest on our Treasurys to foreigners, but delay payments to our vets and retirees? Is anyone driving this bus?
(Read more: Boehner: No 'lines in the sand' on debt limit)
The closer we get to Oct 17, the worse it will be for the markets as the reality of a default will begin to get priced into the market. Now remember, some investors are hoping that the average Joe panics at exactly the wrong time and bails out, creating a buying opportunity for them. Others seem to be able to stomach what is sure to be a volatile ride and are ready to commit more on any weakness. The question is: which one are you?
On Monday, all sectors showed weakness as the broader correction that we all have been talking about seems to be at our doorstep. As we continue to navigate the drama in D.C. and the beginning of earnings season, no one should be surprised if we see the pressure build in the weeks ahead. In the end, though, as I have been saying, I do believe stocks will build to finish the year on a plus tick once the dust settles.
From the Dow perspective, we hit resistance at 15,695 back on Sept. 19 and are now likely to test the 14,800 level, which would represent a 5.7 percent pullback. If the jokers in D.C. can't get their act together, then the Dow may even test the 14,600 level, a range not seen since June. For the broader S&P, we hit resistance at 1,725 and have since corrected by some 3 percent ending Monday at 1,676—(this is clearly NOT a panic situation) below the 50-day moving average of 1,679. A further test lower will see the market test 1,665 and then 1,625.
And now from the kitchen of Kenny Polcari, here's his recipe of the day!
Uovas in purgatorio
Definitely a day for a classic Sicilian dish. Uovas in purgatorio (eggs in purgatory). This is a dish that keeps making the rounds, but makes sense as investors and traders continue to feel like we are being held in this "netherworld." Enjoy!
First, sauté the garlic and then add the chopped/diced onions. Cook for 15 minutes or so. Now add crushed plum tomatoes, season with salt and pepper as well as fresh basil and a pinch of sugar. Bring to a boil and then turn down to simmer. Cover and let simmer for 30 minutes or so. This is just a very basic marinara. I also add grated carrots and celery, but you can do as you wish. Now you need a loaf of fresh Italian bread and eggs.
After you make the marinara sauce, transfer some into a shallow frying pan. Turn heat to medium and now crack open some eggs, drop them in the sauce, whole, as if you are poaching. With a spoon, move the sauce over the eggs so that they cook. Do NOT let the yolk get hard. You want the whites to cook and the yolk to remain soft. Transfer to a plate, cover with more marinara and serve with the fresh bread. Go on, just try it! Buon appetito!
—By Kenny Polcari, director of NYSE floor operations, O'Neil Securities and CNBC contributor, often appearing on "Power Lunch." The author is not compensated by CNBC for this or any other written materials found on CNBC.com.
About Kenny: Kenny has more than 30 years of experience on Wall Street. Currently director of NYSE floor operations on behalf of O'Neil Securities, he has also worked for Icap and Salomon Brothers. You can follow Kenny on Twitter @kennypolcari and visit him at kennypolcari.com.
Disclosure: The market commentary is the opinion of the author and is based on decades of industry and market experience; however no guarantee is made or implied with respect to these opinions. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of O'Neil Securities or its affiliates.