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...and as long as the small caps and secondaries (NASDAQ) maintain their bullish bias, the path of least resistance will remain with the buyers until proven to the contrary.

Although it was a bit sloppy in places, the holiday shortened week turned out to be firm one overall with the best performance coming from the small caps and secondaries as they showed gains of anywhere from 1 1/2% to 2%.

Some of last week's highlights included a strong performance by the NASDAQ's European counterpart, Germany's DAX index, where we saw an upside acceleration to new all time highs in both the DAX advance/decline line and the price averages themselves. Here in the US, the NASDAQ advance/decline line (see cumulative charts) continued its historic run to the upside, while the NYSE Common Only advance/decline line once again settled at new all time highs on Friday. This ongoing strength in common stocks, and in the growth end of the market here in the US and in Germany, continues to suggest that money is betting that we'll be seeing strong earnings growth coming from both sides of the pond over the next 4-6 months.

In other areas, the NYSE Composite, NYSE Specialty CEF and NYSE Preferred stock advance/decline lines continued to be firm this past week with the preferred basket now at its highest levels since July. Meanwhile, the NYSE Bond CEF and NYSE REIT advance/decline lines were held pretty much in check when all was said and done. If the interest rate sensitive issues can maintain their buoyancy over the next couple of weeks, this may be our first indication that the markets will be looking for further monetary accommodation by the new Fed Chair, Janet Yellen, when her term begins early next year. This would also be a precursor to seeing a probable bottom in the precious metals asset class sometime in the spring as liquidity excesses begin to rise on a global basis with both the ECB and Japan already providing the cost of money at all time record lows. But for now, the Precious Metals and XAU advance/decline lines moved to new lows this past week, so we'll continue to stand aside there until we start see more constructive evidence that a price bottom can actually be created before jumping on that train.

Have a great week of trading!

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