Dollar rally...

Perhaps, the real reason behind today's equity rally is the prospect of no more rate cuts from the Fed.   At least, this is the perception today and the ensuing rally in U.S. dollar further confirms that particular belief.    So, it took two tries to reclaim 13000 level this week.    This market sure has its own way to make a strong statement.    Based on today's performance, is it time to go fully back into the market assuming a major rally is on the way?    Although it's possible, we are still skeptical a major rally can happen in the month of May.    Historically, this is when things slow down for the market and some participants go away for a nice and long vacation.     Does the market want to send a different message this time?   Maybe!   While we wouldn't just to sit there and not participate in this fun loving action packed up day, yet we wouldn't want to get carried away either and thinking we can party like 1999.    This is after all, the year of major turmoil.

The trading plan is simple for us.   We take a notice of where the money is flowing and extrapolate the potential time frame this phenomenon will last.    We put some of the names with good momentum onto the watchlist and trade them.     Our watchlist, in fact, hasn't really expanded that much lately but we will add a couple more to compliment our playlist.    As we pointed out the last few days, the commodity plays are going through a major correction right now and correction pace is fortunately, fast!   What this means is that if the correction is fast and furious, the correction will more than likely to run its course sooner than later.    Basically, we are NOT removing any of our favourite commodity plays from our watchlist as we think the commodity sector is still an integral part of our trading strategy for this year.     Inflation is not merely a theory, it is a threat to the global economy.   In our opinion, the inflation will get worse before get better.    We noticed toward the end that some of the Agri/Chem stocks seemed to come all the way from day low and closed near the high of the day.    This doesn't guarantee that the short term bottom is in place but we are willing to take a small position in names like MOS, POT for a trade with tight stops.     In terms of area that is working last few days, we obviously have the super techs and financials and a couple earning plays that are making new 52 week highs. 

On the tech front, SOHU behaved really well after its earning report and it notched a new 52 week high.    We think Internet sector is a strong area and we are playing very aggressive when it comes to dips.   The emerging market is also heating up recently and we've taken a liking in some etf such as EWZ and FXI.   

Tomorrow we have a job report to show for and we think the reaction will be somewhat muted regardless of the report.    The attention this week is very much on the Fed policy statement as well as the Dollar strength and commodity weakness.    If we get sold off on the job report, it is nothing more than old fashioned profit taking we'd be looking at some dip opportunity to get our hands on.