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Looking toward to next week then, the interplay of index prices with their 200 day EMA's will still remain our primarily focus...with obligatory snapbacks for those indices that broke above this time period resistance level this past week (INDU, SPX, COMPQ), and the potential for breakouts above this same EMA line for those indices that still haven't done so (NYA, MID and SML). What happens in this relationship will likely set the tone of what we should expect for the month of November...with better volume plurality also being an important sticking point in helping prices to attain even higher levels.

Aside from some mid week fireworks to the upside, the major market indices wound up mixed overall with only an average gain of .07% from last Friday's settlement. The month of October, however, turned out to be the best one seen in four years with an average gain of 7.41%, with the NASDAQ Composite (+9.38%) and the NASDAQ 100 (+11.19%) leading the way higher, while the S&P 400 Mid Cap Index and the Russell 2000 Index bringing up the rear with 5.55% gains. Not bad.

Looking over the breadth charts array for this week shows little in the way of changes from the previous week with the NYSE Common Only advance/decline line still finding it difficult to break above its declining tops line going back to its all time highs in May. On the positive side, however, both the NYSE Bond CEF and NYSE Preferred advance/decline lines continued their treks into new all time high territory further suggesting that interest rates will likely remain in and around current levels for the next several weeks. Further positive action was also seen overseas in the CAC and DAX advance/decline lines where both saw snapback action to their breakout lines before winding up with higher highs at the end of the week. Overall then it wasn't a bad week internally in spite of the fact that we continue to see a lot of chart action interplay with the 200 day EMA on many on the major market price averages at this time...a direct reflection of the indecisive behavior that we're currently working with between index charts.

This chart pattern game play in relation to the 200 day EMA is also being seen with the price action of spot gold and silver as both saw sharp intraday reversals on Wednesday at this same line of resistance before finishing lower for the week. With the Precious Metals and XAU advance/decline lines continuing to show a definitive series of divergent tops in their structures, our ongoing defensive stance toward this asset class remains unchanged.

So although things look pretty good at first glance, there are some caution signs flashing now as we move into the month of November. First, and foremost, the BETS indicator moved sharply lower this past week to a -40 reading due mainly to the weakness seen in ETF and Canadian issues. Along with this "re-initiate shorts" signal, several of the of breadth MCSUM's that we follow in the chat have been showing some lethargic behavior of late due to the lack of upside trend plurality in the daily advance/decline data. Because of this, it wouldn't be too surprising to see the beginning of a 2-3 week period of choppy, volatile behavior going into OPEX on the 20th, but this time with a bearish aura accompaniment. Once this digestion period is out of the way, and as long as the interest rate sensitive issues continue to show good promise, the market should then be in a better position to see higher price highs as we move into the end of November period and lasting through the middle part of December.

Have a great trading week!

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