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In this process, prices should remain highly volatile, and quite choppy, with much of any pullback being absorbed quickly by the high levels of liquidity that have returned to the exchanges over the last week.
A remarkable week finished off a remarkable month with the major market indices tacking on another 3.37% after last week's 3.80% average gain. For the month of October, and after being down by an average 4.65% mid month, these same major market averages made up for these losses and actually rose by 3.21% with the S&P 600 small cap index leading the way higher by a jaw-dropping 7% gain! It should also be duly noted that the Dow Industrials, Dow Transports, Dow Utilities, S&P 100, S&P 500 and Wilshire 5000 price indices all closed at new all time price highs on a closing monthly basis on Friday, while the NASDAQ Composite and NASDAQ 100 indexes finished up at their highest levels since the March 2000 all time highs. Yes, the month of October was not only exciting, but it was quite an historic month on many technical levels as well. Looking over the NYSE breadth charts array this week and we see that they all continued to move to higher highs led by the interest rate sensitive derivative NYSE Bond CEF, NYSE Preferred and NYSE REIT advance/decline lines which all closed at new all time highs on Friday. In fact, the Real Estate iShares index closed at new all time price highs when the bell rang on Friday while gaining a whopping 8.35% for the month! With that said, however, there are some short term problems as well with the NYSE Composite, NYSE Common Only and NYSE Specialty CEF advance/decline lines still in need of confirming these same record cumulative levels so that the bulls can feel a bit more comfortable that prices can continue to build on their keystone lows of mid month. Another problem comes with the BETS indicator that only now has moved to a "Neutral, Cash Position" by the minimalist of margins (-20). Much of this problem to succeed though has a lot to do with the Canadian issues that trade on the Toronto and TSX Venture exchanges that have really taken on the chin this past month with the price of crude losing another 11.63% (23.50% since June), while precious metals collapsed with gold now down 9% since the end of August and silver down 17% (23.20% since June) in this same time window. Any kind of rebound then in these commodities would then greatly benefit the (11.60% since June), BETS, so stay tuned there. Speaking of the metals, they finally succumbed to their lack of monetary support this past week as the price and gold and silver finished the week at their lowest levels since the spring of 2010. More importantly, both metals finished below horizontal price pattern support that had held for over a year in this effort. Needless to say, the Precious Metals and XAU advance/decline lines plowed even lower closing the week at historic lows. Usually when we see a significant price break as we've seen here, there is a period of reflex in an effort to snapback to these same areas that provided support before a resumption is seen in the direction of the break. But once that technical expectation is behind us, the .618 retracement level for gold from the 2008 lows to the 2011 highs is at $1158, but we also have a downside symmetrical triangle target already working currently that projects to around $1100 still yet to be met. Unfortunately though with this latest break below support, and after any snapback to the $1200 that might be seen here, a lower price low would then kick off a new downside price target from a right angle declining triangle to around $986. Interestingly enough, the .764 Fibonacci price retracement level of the 2008-2011 bull run comes in at $987 on a closing basis. In any event, and aside from any near term bounces, let's continue to look for weakness in the metals going into the end of the year. Overall then, it was another great week for the bulls as many of the breadth and volume McClellan Oscillators continue to support bullish textural patterns of bottoms above bottoms to the upside. Such high readings of inherent strength does lead to multi month price rallies in the equity markets. We are, however, quite "overbought" currently where some sort of pause is to be expected. Then again, this has also been our expectation for the last 2 weeks as well and the market has continued disobey this dynamic. For now, any pullbacks should continue to be short and rather shallow affairs, with volatility continuing until we finally see some sort of buy side exhaustion from this current run up. Once the pause has provided enough of an affect to once again produce negative sentiment, we should then be ready to see new all time price highs in many of the major market indices that trade in the United States. And for those who are wondering, yes, there is enough energy now in the market to where we will likely see new all time price highs in both the NASDAQ Composite and the NASDAQ 100 during this current advancing price sequence that began in the middle part of October. Have a great trading week! US Equity Markets : US Interest Rates : US Real Estate : Precious Metals: Australia: England: Germany: __________________ Dave's LinkedIn Profile Technical Watch Twitter Page Technical Watch Facebook Page "As for it being different this time, it is different every time. The question is in what way, and to what extent" - Tom McClellan "An economist is someone who sees something happen, and then wonders if it would work in theory" - Ronald Reagan "What we see depends mainly on what we look for" - John Lubbock "The eye sees only what the mind is ready to comprehend" - Henri Bergson “Answers are easy; it’s asking the right questions which is hard” - Dr. Who - 1977 "You know the very powerful and the very stupid have one thing in common - they don't alter their views to fit the facts, they alter the facts to fit their views (which can be uncomfortable if you happen to be one of the facts that needs altering)" - Dr. Who - 1977