Oct 31, 2004

Weekly Game plan

This week I expect some generic weakness on Monday and Tuesday and a bounce when the election reaches resolution. The DXY (Dollar Index) is near multiyear lows which should hold the first test and bounce 2 points from 85 to 87. This rally, if it materializes, will bring with it some metal weakness. I believe that oil has topped so next week we will see general commodity weakness. I would stay away from oil for a few months but there could be some good purchases in the metals.

For the stock market it feels like the semiconductors and NASDAQ are a bit overheated and may underperform. The cyclicals maybe a good place to look for the outperformance. Near the end the week it could be a good time to start putting out shorts in the financials. I think it makes sense to leg into a long term trade buying semis and cyclicals on weakness against finance sector shorts. FNM (Fannie Mae) in particular should begin a multimonth downtrend as it adjusts its business to new capital requirements and new legislation circulates in congress.

I see interest rates as a bit low in here but it I am not sure they are topping out yet. The commodity weakness could be perceived as a sign of the economy slowing or falling oil prices could be interpreted as stimulus.

Vols will probably take a sharp dip on Tuesday as the fears of terrorism pass.


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