No doubt, once again much of the focus, headlines were on the penny stock, Lehman today.    Most of you have probably followed the drama as much as we have and are fairly amused by the hourly progress.    Honestly,  we feel sorry for Lehman's management to be simply strangled by the market participants.    The late surge in index is once again sparked by the news that BAC is in talks to buy LEH, even though a nice reversal was already underway.  Oh yeah, BAC + Countrywide + LEH  would make a dynamic team, wouldn't it ;)!    There's also speculation that a deal would not go through without some sort of assistance from the government similar to the BSC arrangement.    This is definitely one of the most interesting situation we've come across in a long while.

Ok, eventually, this LEH thing will settle and a deal or lack thereof will come out of it.    We are not going to put any emphasis on the outcome of LEH as it's simply entertaining than anything else.   What we are concerned here is what is going to happen with this market after LEH saga.    Corporate earnings will come out soon and we'll then be focused back onto the economy.   Now that commodity prices have come down dramatically, there's no immediate worry of inflation.    The biggest question is "can the companies deliver confidence?"  to market participants.    Trading is often based on perception and not actual data,  traders will act according to that vision.    This is the exact reason why oil went up so much earlier this year and now dramatically down since July.   You can also draw the same conclusion about any other commodity out there.   Unfortunately, perception is also being associated with speculation, in our opinion.    Much of the trading these days is based on speculation and the trend of heavy speculation is likely to continue for sometime.    So, this is what we as retail traders have to deal with on a monthly, weekly and daily basis.   Speculate..and the last few days we've been doing just focusing on a potential reversal in commodity stocks anticipating a stall and/or pullback from the $USD at 80, coinciding with Oil finding support at $100 and trending higher in the short term.

Late in the day we issued alerts that we are buying small chunks of commodity plays here and there.    The reason we did that was because..

1. the commods halted their slide yesterday and reversed today off previous days lows nicely.

2. despite the weak oil and strong $USD, commods are holding their ground and most closed near high at the end.     This is just a bounce trade in our book for now and we'd increase position if we get some more momentum and we'll bail if things get hairy.

3. Ike

Bottom line, there's tons of stuff that's going on besides LEH and we have to keep our eyes out and not to get distracted. 

On a technical basis, the major indexes/ corresponding ETF's (DIA, IWM,NDX etc.) put in engulfing candles which may put a scare into many a short into the weekend.  This was a wild, positive outcome considering early on it seemed all but over for the market as SPX hit 1211 (interestingly, almost to the tick from July 16th reversal start) and therefore this reversal has to be paid attention to.

A scattered look at resource related stocks off our list, we all have our favorites by now to trade....