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Well, things came through on Friday and the GMI is back to +6.  There were 272 new yearly highs and only 40 new lows in my universe of 4,000 stocks.  Almost one half (48%) of the stocks are above their 10 week averages and 30% are in a short term up-trend, up from 24% at the beginning of last week.  On Friday, 78% of the Nasdaq 100 stocks rose, 65% of the S&P 500 and 57% of the Dow 30 stocks.  The growing strength in the Nasdaq 100 stocks is evident in  the fact that 57% are now above their 30 day averages, up from a low of 28% on 9/22.  The Nasdaq may lead this market up.   We are now in day one (U-1) of the new QQQQ up-trend.

The WPM shows the broad reversal in the five indexes. All indexes are above their 30 day and 30 week moving averages.  Their component stocks also showed strength with 50-57% of the stocks closing above their 30 day averages.  Between 57-60% of the component s of all of the indexes but the Dow 30 (DIA, 43%) closed above their 30 week averages. The weakest stocks in the Dow include:  DD, WMT, MRK, AA, MMM, JNJ, DIS, PFE and GM–all well below their 30 week averages,  a key negative according to Weinstein’s stage analysis (see his excellent book, listed at right).

I closed out my shorts last week.  I remain very cautious until I see whether there is any follow-through this week.  Was last week’s strength merely end of quarter buying by the funds? I rarely see so many reversals in my indicators, which are designed to detect meaningful changes in trends.  I will need to see a few more up days for me to become confident enough to take on new long positions.  October has always been a difficult month, but October declines often set the stage for a good end-of-year rally. Stocks I am watching, some of which I own, include:  ADSK, CX, NSC, HTN, VLO, AAPL , ISRG and NX……………..

By the way, if you do not know about I-bonds, check them out here.  I use these U.S. government bonds for savings that I will not touch for a long time, instead of keeping the money in a bank.  I-bonds are protected against inflation and have been a great place to put my kids’ savings……….

Please send me your feedback at: silentknight@wishingwealthblog.com.

The market internals reversed Thursday and showed unusual strength.  The GMI rose to +4 and could rise to +6 with another advance tomorrow.  There were 240 new yearly highs in my universe of 4,000 stocks and the percentage of stocks in a short term up-trend has gradually risen from a low of 24% on 9/26 to 29% on Thursday.  The percentage of stocks closing above their 10 week average has risen from 37% on 9/23 to 47% by Thursday.  Between 78-83% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes advanced on Thursday.  There were 105 successful 10 day new highs.

I am still cautious about this rally because it is occurring at the end of the quarter.  Mutual funds may be loading up on recent winners in order to look smart when they release their 3rd quarter portfolios.  (This tactic is called window dressing, because the unsuspecting investor cannot tell the exact date that these shares were acquired and the fund manager appears smart to have bought these winners.)  I am still inclined to wait until next week to determine the market’s probable direction.

Please send me your feedback at: silentknight@wishingwealthblog.com.