When things stop going down on bad news...

This is a classic sign of a bottom. I am seeing terrible, awful, and downright omninous news in cyclicals, retail, and transports yet they are going up (today and the past week or so). I am pretty excited about this observation. Lets see if it holds true, shall we? I am so glad this awful October is over.....

Getting Back Into Commodities

By far, my best trade this year was short gold/long US dollar. I think this trade may have run its course as the fed lowers rates to stimulate the economy. The dollar should go down on this, and as result, commodities will go up. I think the coast is clear to dip my toe back into commodities. It should be noted that commodities and energy are late cycle plays, and are usually the last to go up. Furthermore, deflation is rampant and commodities are usually good inflation hedges. But as the fed lowers rates, the only choice is to inflate our way out of this crisis. These are my only qualms getting back into this sector.

Overpaying for downside protection...

Is it just me, or are people paying WAYYYY too much for downside protection? The time to pay up for downside protection was in August, not now.... I'm actually quite willing to sell downside protection to others right now.

Once the dust settles...

I think the government bailout of AIG, while letting the largest dealer of commercial paper die (Lehman Brothers) is going to be viewed as a big mistake. I worked on a commercial paper desk many moons ago and I realize how it is the lifeblood of commerce. This panic is worse than it could have been by this error of judgement.

Banks, Transports, Retail

In addition to banks and small caps exhibiting bullish chart formations, I am liking the charts of transports and retailers. Both of these sectors are early cycle recovery plays, and may just follow the new market leader. All hail banks....Transports and Retail may just follow you soon.