Although the calendar says it’s still summer, when it comes to the markets the season has changed to fall. Everybody–Congress, corporations, trading-desk jockeys–is back to work, but much of the activity isn’t helping the markets.

Let’s look at what isn’t working right now. Topping the list are energy commodities. Oil, coal and natural gas are slipping and sliding further, so alternative energy stocks aren’t getting much, if any, respect. Members of our collection are all down hard this week. But is the story over? No, the fat lady hasn’t yet come on stage.

Our alternative energy plays need a reaffirmation of their lifelines: a helpful boost from government spending. We’ve already witnessed the impact of such financial support on companies such as WorldWater & Solar Technologies (OTC: WWAT), which has earned several contracts from state and local politicos of late.

China’s government is also eager to write checks to provide badly needed power generation facilities to local economies, and Beijing wants to avoid adding to ecological woes. So Yingli Green Energy (NYSE: YGE) is seeing more deals and more cash.

But underlying operating conditions aren’t enough to stimulate stock traders. They’re simply not taking time to understand relevant facts and figures for individual businesses. It’s a whole lot easier for folks to simply to hit the “sell” and “short” buttons rather than to pore over business plans and financial statements.

That said, something is coming that will reaffirm our confidence in our alternative energy plays. The good old US Congress is in budget season. It is an election year, but members on both sides of the aisle, in the House and Senate, love alternative energy. Even the Speaker of the House has offered support to T. Boone Pickens and his private deals to develop his windy, sunny properties in Texas.

We’re going to get federal support, whether it’s in the form of flat-out cash subsidies, eased development restrictions or tax breaks. Don’t throw in the towel on these great assets. Your patience will be rewarded.

Another wave of government support will soon come to defense companies, and it won’t be limited to the US. We’re not aware of a single government in the world that’s cut or has plans to cut defense spending. It’s a helpful hand for our UK-based contractor QinetiQ (London: QQ., OTC: QNTQF, OTC ADR: QNTQY).

As for commodities, everything–not just oil and gas–continues to be sold off by trading houses and financials that need to raise cash. Their commodity positions are among the few still worth something. Prices are slipping, adding to the near-term challenges for our agriculture technology plays as well as our index play.

Makhteshim-Agan Industries (Tel Aviv: MAIN.IT, OTC: MAIXF) remains on hold, and we’re cashing out of Deutsche Bank Commodity Index Tracking Fund (AMEX: DBC).

Water, though, is different. And with Suez Environnement’s (Paris: SEV, OTC: SZJSF) US over-the-counter (OTC) shares straightened out, look for mutual funds and other institutions to show more interest in coming weeks.

We continue to recommend shorting SPDR KBW Bank ETF (AMEX: KBE); don’t think for one moment that the bailout of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) means the financials are fixed. Yet another bank was seized by the Federal Deposit Insurance Corp (FDIC) this week, and Lehman Brothers (NYSE: LEH) is down on the street corner, hat in hand, looking for cash while it tries to pawn its assets.

Current Ideas

Buy pSivida (NSDQ: PSDV)  

pSivida is still bouncing around the 3 area. If you want to day-trade this thing, go long around 2.90ish and sell around 3.10. That guideline has seemed to work for the past two months, and I don’t see why it won’t work until the quarter is over.

With its two major drug delivery technologies in late-stage trials, pSivida is just biding its time. The bet here is both come out of trials as important products in unique areas. And nothing is getting in the way of that, so this is a good price for a bionano bet. pSivida is a buy.

Hold QinetiQ (London: QQ., OTC: QNTQF, OTC ADR: QNTQY)

Even as the UK Ministry of Defence sold its major stake in the common stock at 206 pence and the London Stock Exchange SNAFU sent many stocks into a brief tailspin, QinetiQ never went under 210. And today it has rallied again. There’s now more stock on the open market, and the company’s US branch has announced its new Dragon Runner Small Unmanned Ground Vehicle (Dragon Runner SUGV).

Dragon Runner SUGV is the first fully modular ground robot system capable of both quick reconnaissance and improvised explosive device (IED) disarmament in urban, mountainous or rural environments.

Based on a robot originally designed for the US Marine Corps, the modular base unit Dragon Runner weighs less than 20 pounds and can be carried by one person in a standard-issue pack. With field-transformable features that quickly snap or bolt into place–no special tools required–Dragon Runner SUGV can morph to fit virtually any mission.

Dragon Runner SUGV can adapt quickly to fit a variety of critical mission scenarios including, reconnaissance inside buildings, sewers, drainpipes, caves and courtyards; perimeter security using on-board motion and sound detectors; checkpoint security; in-vehicle and under-vehicle inspections; and hostage barricade reconnaissance and negotiation. Operators of Dragon Runner SUGV have the ability to add tracks for maximum mobility and a manipulator arm with rotating shoulder, wrist and grippers for dexterity. In addition, day and night pan/tilt/zoom cameras, motion detectors and a listening capability allow Dragon Runner SUGV to further extend the combat team’s situational awareness.

This is going to be a very important project. And now, with the stock freely floating, top-tier defense firms will be even more interested in QinetiQ as an acquisition as well as a partner. QinetiQ is a hold until the news settles in and we determine its support at these levels.

Hold Makhteshim-Agan Industries (Tel Aviv: MAIN.IT, OTC: MAIXF)

The broader issues with the commodities markets are weighing on the stock but not the company. The underlying business keeps humming along; traders simply aren’t interested in agriculture technology companies this week.

Makhteshim-Agan still looks like a great takeover play for a US- or Europe-based agriculture technology company. Despite the pullback in commodity prices, the world still needs more food. And because North America, Europe and Asia are embracing newer agriculture technologies to boost food supplies, Makhteshim-Agan continues to be in the right business. Continue to hold Makhteshim-Agan Industries, and let’s see how the market reacts in the coming weeks.

Buy SES SOLAR (OTC: SESI)

SES Solar is down hard this week. It’s a small company in the right industry–in the wrong month. The stock continues to bounce up and down. It’s cheap and should be taken over, which might be coming at some point.

We’re still buyers because the needs and wants for alternative energy are far from satisfied. We continue to recommend this company, which specializes in making rooftop arrays and photovoltaic panels as well as connectors used to hook multiple panels together; this arrangement means less energy is lost from panel to generator–just the thing to set up solar power systems that work better. SES Solar is a buy.

Buy Yingli Green Energy (NYSE: YGE)

Yingli Green Energy has given some back this week after previous weeks’ surges. It’s all about the alternative energy market getting whacked with oil, gas and coal.

But the business is solid. Yingli has consummated several deals, including a financing facility to continue to fund current projects such as a new facility in Beijing. Continue buying Yingli Green Energy on dips.

Buy WorldWater & Solar Technologies (OTC: WWAT)

Once again, alternative energy stocks are starving for business while the US Congress plays politics with the energy bill. One thing is guaranteed in an election year: Congress will get off its butt by October, the beginning of the new fiscal year and one month before a major election cycle.

With all the fear in the air, it’s a good time to buy a good company with unique products. WorldWater & Solar Technologies is a buy.

Sell Deutsche Bank Commodity Index Tracking Fund (AMEX: DBC)

Although commodity companies aren’t done, for now the index plays aren’t what we need. Forget the longer-term supply and demand situation; the guys who own major blocks of commodities need cash, and this means we’ll see more sells than buys.

There’s still a real argument in favor of owning commodities, but the market isn’t going our way. Sell Deutsche Bank Commodity Index Tracking Fund.

Short SPDR KBW Bank ETF (AMEX: KBE)

Another week, another group of FDIC employees manning another bank’s executive suite. Lehman and other financials are clearly troubled, and there are a slew of banks operating under FDIC Letters of Understanding, meaning their near-failures are covert.

The US Treasury spilled billions to help prop up Fannie and Freddie, but won’t keep happening week after week because not even Uncle Sam has infinitely deep pockets. Continue to short SPDR KBW Bank ETF.

Buy Suez Environnement (Paris: SEV, OTC: SZEVF)

The stock is off a bit this week; the broader US and European markets are getting hammered as well. On the plus side, Suez Environnement keeps pumping and cleaning water.

And the good news we’ve been waiting for has arrived: The US OTC shares are now being traded, and we wouldn’t be surprised to see either a New York Stock Exchange listing or an American Depositary Receipt to follow. Buy Suez Environnement in Paris or on the US OTC market.