It is certainly a good day for the bulls again. Despite weaker than expected housing data, the market simply focused on the potential fed cut. As I mentioned yesterday, this thought itself is not wrong, but the problem is that it can also backfire. By that I mean if investors realize they may not get want they want, a big sell-off is very likely. Oil jumped to new record amid concerns of storms and this certainly adds risk of inflation down the road. Tomorrow is the last day of this quarter and some rebalancing could be already undergoing.

The market continues to show strength amid bad economic news. It appears that investors are willing to believe that more bad news are actually a good thing as it warrants more Fed cuts. While this belief has certain merits, I would like to emphasize that it is a risky bet as more bad news can also mean the economy is closer to a recession. If the latter is indeed the case, it is certainly a little scary as the market now is almost back to the previous highs. Oil market was up a little despite bearish inventory data. Interestingly, Yen also weakened a little bit against dollar today. If you pay attention to the relationship between the Yen and those risky assets(including gold and oil), they almost always move in opposite directions, indicating more carry trades(or unwinding) are going on. Tomorrow will bring several more economic news, including the final GDP read for the second quarter. How the market will react to those news is certainly worth watching.

Not surprisingly, there is still little news that shows the US housing market is already bottomed. What does surprise many investors, myself included, is that the market holds remarkably well in front of bad news from Lennar, Lowe's and several retailers. This is indeed a good sign as it shows investors are willing to shrug off bad news. Oil slided further today and now is back below $80. Tech stocks are doing relatively well and several big names hit new record, including Apple and Bidu. And I continue to think that techs should lead the market if there is an end-of-year rally.

The market is holding up relatively well after last week's huge gain. There is not much new news in today's market. The main investing theme of this year remains hold: that is, everything related to China or emerging Asia is doing great while anything related to US housing market is doing poorly. I expect this pattern to hold through the fourth quarter. But sometime next year it may change and that will be a perfect time to enter short positions(remember, a bubble can only burst when it cannot sustain itself). Oil price retreated a little bit but remained at an elevated level. Most US airlines are doing poorly following American Airline's disappointing earning prospect --- hardly a surprise given 80+ oil price. US dollar continued to weaken against major currencies but personally, I think the bottom of the US dollar is very close - with weak dollar the trade gap will be greatly narrowed both this year and next year(actually if you travel to the States these days, you will find things are incredibly cheap there. In other words, US dollar should appreciate, not depreciate!)