As expected, the market is extremely quiet today. The volume is heavy, but most of that is due to the option related rebalancing. S&P is up almost 3.5% this week and is doing particularly well this September so far, which is historically a weak month for stocks. Next week will be real test to the market to see if the rally can be hold. If so, the market will have a good chance to make new historical high towards the end of this year.

The market holds remarkably well considering the vast gains from the previous two sessions. Trading volume is lighter, which is a good sign and indicates the rally has legs. US dollar is moving sharply lower against major currencies today. As for CAD, it is back to parity, which was seen last back in 70s. For Euro, it broke the key 1.40 level. But I feel that as long as the drop is orderly, this should actually bode pretty well for US exporters and hence the economy as a whole. Most inflation sensitive commodities were rising following the weakness of the dollar. Not surprisingly, oil again rose to another record close. Tomorrow will be the option expiry date. Without any shocking news, it should be a relatively quiet day.

In today's market comments, I would like to spend a few minutes reviewing the comments I made back in Aug 17th and Aug 9th (both are attached below for your reference and actually I was on vacation during the week of Aug 10th - Aug 16th). Now when looking back, one can see that both the comments of "the market may remain weak until some events happen(e.g, rescue from the Fed)"(from Aug 9th comments) and "the lows that both Dow and S&P touched yesterday have a very good chance to be the lows of this correction"(from Aug 17th morning comments) have turned out to be right. Actually I'm not very well at guessing games(can be easily proved by my 10th wrong prediction of oil price and my personal belief that the Fed would cut 25pbs yesterday) and it just happened to be right both times. I have a habit of studying the past, not just those done by others but more importantly, studying those done by myself. It is through studying those past mistakes that I find a way of improving myself, and hopefully also my trading results. So why did I dare to make a bold prediction that the lows might already been seen on Aug 17th? This is because through many years of my trading experience, I find that most people cannot escape from the weakness of human nature, that is, greed and fear. When VIX hit 37 back in Aug 16th, I knew that the bottom should be very close but I also know it would take a while for the VIX to drop below 20. Today, the VIX has finally dropped below 20. Guess what? Most stock indexes around the world are already back to their pre-crash level, if not higher. This is indeed a remarkable month and I hope I can share more this kind of experience with all of you in the future.

Quick comments on the Fed's decision:
Bulls got the best of what they can hope for: 50bps Fed rate cut + 50bps Discount rate cut. In the short term, the market will have many shorts covering before the option expiry date, which is this Friday. But from the text of the committee release, it seems that inflation is still an ongoing concern, especially when Oil creating new highs almost everyday.

Most investors are simply waiting in the sideline for tomorrow's Fed decision. It will probably be the most interesting Fed meeting in my investing experience so far. Why? The market still hasn't decided on how much the Fed is going to cut. More important, how the market will react to the Fed decision. Tomorrow morning will bring several interesting reports, including Lehman's latest earning report. How Lehman did in the past quarter has a good chance to set the tone for the rest of the investment banking groups. Oil closed at another record high and now is firmly above $80. But it doesn't matter for the time being as everything can change at 2:15pm tomorrow...