After a couple of brutal months, August has seen a re-surgence in the market. The "micro-cap switch" has not flipped back on, but it is still August. September probably represents the last opportunity to do some bargain basement shopping. For those of you who need a reminder, September is generally the worst month of the year in the stock market.

Overcoming the early summer sell off appears to relate to interest rates and inflation. The ideal scenario for the markets would be slowing but sustained growth with little sign of inflation. This would allow the FED to continue to stand pat, and perhaps lower interest rates if the economy appears to be slowing.

Over the past several weeks, both the bond market and the stock market appear to be buying into the "soft landing" scenario. Three economic reports in a row indicated a slowing economy with little inflation- CPI, PPI, and housing starts all have moderated. The FED has succeeded in cooling off an absurdly hot real estate market. However, there still remains one major threat to the tame inflation picture: Commodities, and specifically oil remain the scariest potential source of inflationary pressures.

I've heard a wide variety of opinions about the future of oil prices. Despite all the varying and dire predictions, one theme is universal. Nearly all analysts and "experts" agree there is about $20 per barrel of "risk premium" built into the price of a barrel of oil. $20 per barrel has nothing to do with supply and demand, and everything to do with geopolitical turmoil and unrest in the Middle East.

If the soft landing scenario plays out, and oil remains tame, we could be in for a very strong market in Q4. One important thought: September is usually the worst month of the year for stocks. I believe investors sell stocks in September out in front of Q3 earnings reports, which tend to soften a bit over the summer vacation months. Once Q3 numbers are in the rear view mirror, the market tends to trade well out in front of the holiday shopping season.

You have been warned. September is seasonally a great month to be a buyer. Get ready to pounce on oversold opportunities.

Blog entries posted this past week, GNBA, FRPT, and Trading Alerts.

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