At this point I think the dollar is the key. If the current daily cycle breaks down and moves below the June lows then the odds favor inflation. If the dollar can hold above the June lows then deflation is probably still in control.
Since the fundamentals for the stock market have not improved and the bear still hasn't taken the market to absurd valuations yet, any positive action in the stock market will be based on whether the Fed is successful in breaking the dollar.
As long as the dollar remains below the important 80 level I don't want to be short anything. However I'm really not interested in investing in sectors with impaired fundamentals and that surely includes everything from banks to energy and tech. None of these sectors are going to flourish in a declining global economy
The one sector I continue to like is precious metals. This sector does have improving fundamentals and if the Fed is successful in debasing the currency so much the better.
So far the 5 month consolidation appears to be wearing out most of the bulls, which is exactly what we need to happen for gold to break through the $1000 mark.