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Markets Keep 'Melting Up' As Dollar Goes Down

A strange day ... volume is light, trading desks are not busy ... but the markets keep melting up as the dollar hovers near new lows.

And the CBOE Volatility Index is at an 18-month low...indicating that complacency is high. In the past, when this indicator hit extremes (as it is doing today), it was a warning sign.

But the VIX has not worked very well at extremes since the lows of last year--either as indicators of short term tops or bottoms.

Most traders--particularly hedge fund traders--that I speak to would be happy to close out the year right now. Most are sitting on substantial gains.

What they don't want to see is a scare late in the year when everyone will run to the door at once.

"The market is stupid over bought, but it's performance is attracting more money," one traders said to me this afternoon.

One lagging sector today: homebuilders, on a poor sentiment indicator from the National Association of Home Builders (NAHB).

"The approaching expiration of the $8,000 home buyer tax credit...could derail the fragile recovery in housing just as it is starting to take shape," said Joe Robson, chairman of the NAHB. We'll have September housing starts tomorrow.

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