Ground Floor:US traders generally take a breather this week as their attention is focused more on Thanksgiving than on the markets, but it's all systems go again after today when the unofficial run-up to Christmas starts and attention turns to the retailers. Whatever your religious beliefs, there's no question in the minds of the markets that the only good result is a total consumer-fest in December.

But can the nervous US consumer shrug off the chill winds blowing through the housing market to spend as much as the traders want? Last week's figures showed that many builders have put aside the scaffolding and cement mixers as housing starts fell to a six-year low. Construction of new homes was down 14.6 per cent in October - dismal news for anyone in the sector.

Despite Alan Greenspan's recent words of comfort, it seems that the builders aren't taking any chances - building permits were down 6.3 per cent, the lowest level in nine years. The pessimists are talking the hard-landing talk big time, yet the markets managed to end the week on a high. If homeowners are gloomy, how come equity traders aren't?

It's mainly because they were looking at something else - the decline in oil prices - to cheer them up. Despite the fact that October was a dreadful month for anyone whose main asset is their home, equity holders were in a bullish mood, with the Dow finishing at a record high. Last Friday produced its sixth session of gains in a row.

Much of the exuberance (rational or otherwise) is due to the fact that, after a relentless period of price rises, oil hit a 17-month low last week. Oil producers are now looking at prices of around $58 (€45) a barrel, prompting Opec to begin talking about further cuts in production.

Oil has been a particularly instructive market when it comes to demonstrating the concept of supply and demand - last winter, when demand was surging and a cold weather snap had taken hold, traders feared that production couldn't keep up and prices were driven higher on a daily basis. Now, weather forecasters in the US have been predicting warmer than usual conditions and, for the moment, the demand for heating oil has fallen.

Opec wants to see oil prices of $55-$60 per barrel, but most analysts are sceptical of managing this in the short term because it has yet to implement a promised output cutback this month.

Despite the fact that we are still profligate when it comes to efficient energy use, the percentage of oil that the global energy market uses is now at around 33 per cent. In the 1970s, almost half of our energy use was oil based.

Although we're using less oil to produce the same amount of electricity we did 30 years ago, we've diverted that oil use to transporting goods. It seems that no matter how much more energy efficient we become, we will always find a reason to demand oil.

Which is why the falling price has cheered those Wall Street traders so much. In some respects, traders are also looking past the negativity of the house price falls and beginning to evaluate the potential for the Federal Reserve to abandon its tightening of monetary policy and give a little slack back to the market too. The Fed, unlike the European Central Bank or the Bank of England, takes economic growth into account when setting its rate levels and if it feels that inflationary pressures are easing thanks to both lower oil prices and lower house prices, it may well decide that the time has come to cut rates and stimulate demand from worried houseowners.

The only downside to that, from the Fed's point of view, is what it might do to the dollar. Almost every currency trader I know feels that the dollar is overvalued, but the Fed's interest rate stance and hawkish comments until now have been a major support. The reasons for a potential fall are legion - the frightening current account deficit, the budget deficit and consumer confidence are only part of the overall picture. If negative sentiment takes hold, the dollar could be in for a very bumpy ride.

But none of this matters now. Traders are facing into the next few weeks full of bright-eyed optimism because, in the short term, things are looking good. And the way they look at the longer term is that the Fed will be there to support the worried consumer, helping him or her along with those rate cuts to get spending back on track again.

When traders talk about cycles, they don't always mean long-term ones like your average economist. They're not looking at the gentle segue from autumn to winter to spring and to summer. They're looking more at a kind of a rapid wash cycle that'll give you a fast spin and a nice new set of clothes to wear in double-quick time.

Let's hope that they're not disappointed. And that there isn't any hidden dirty washing in the global economic laundry basket.

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