Hello All,
 
Stocks surged today on the back of positive US and China manufacturing data,even though construction spending was down in the states.  Amidst all the market pessimism today's data was obvisouly greeted with open arms, however you shouldn't be getting bullish just quite yet.  Technically we took out the previous high and stopped out the weak shorts, which could also be associated to fund money pouring in at the beginning of the month.  From a value perspective stocks may be cheap, but from an economic perspective most macro data is predominantly bearish projecting slower growth.  We have initial claims, productivity, factory orders, and pending home sales due to be released tomorrow ahead of our unemployment data on Friday.  Volatility is picking up as uncertainty increases during thinner than normal trading conditions.  The Euro surged today on expectations that the ECB will extend liquidity through the end of the year on Thursday.  This is positive news for the Euro and I expect the currency to test the 1.30 region before meeting any resistance.  If our jobs number on Friday is as horrible as everyone is expecting it to be, then the devaluation of the dollar and the hunt for riskier assets outside of the US will support this theory.  The Yen could continue to be a safehaven currency to extend above the 15 year high.  We also have currency option expiration on Friday which will contribute to the volatility and skew.   With respect to crude oil, the support from outside markets and China's growth were enough to erase yesterdays steep decline.  Another contributing factor could have been the hurricanes path up the east coast and the possibility of affecting refineries.  But fundamentally we continue to have increasing weekly supplies which only add to our record inventory.  Technically the market is poised to not only test the $70 level, but to break through it.  The current volatility is increasing premiums on both ends of the option spectrum as it has attracted both bull and bear speculators given the uncertainty.  My money is on the short side, and tomorrows Nat Gas data may be enough to pull the complex lower.
 
1)  Sell Sept. Emini S&P at the market (1077.75), with a 1086 stop.  Exit 1025.
 
2)  Buy Sept Euro at 1.2740, with a 1.2663 stop.  Exit above 1.30.
 
3)  Sell Oct Crude at the market (73.80), with a 74.76 stop.  Exit below $71.
 

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Arman Vahdatinia
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