Market Summary

Market direction continues to go up while the Volatility Index ($VIX) continues down and the next target for the market is the 1200 mark on the S&P 500. Anticipation of the second round of Quantitative Easing (QE2) seems to be driving the market higher and began after Ben Bernanke gave a speech August 27, 2010 that can be found HERE. The next meeting of the FOMC scheduled for Nov. 2-3 should be pivotal in this market as the Fed gives further guidance on its monetary policy. What is interesting is that the US Dollar, which began a decline around the same time as the speech referenced above was also the same time that the stock market began its most recent rally. Clearly monetary policy is affecting the market and responsible, at least in part, for the rally. Click on the chart to enlarge.

While gold remains up the most for the YTD period it has come off its highs and the Russell small cap index, up the second most for the year, was relatively flat for the week as were most of the other markets. Of note then for the week are the decliners of greater than 1% which includes FXI, EEM, GLD, and UNG. China raised its key interest rate last week and raised capital requirements at banks. China's GDP grew 9.6% from a year earlier in the third quarter, slowing from the 10.3% rise in the second quarter. Click on table to enlarge.

Market Summary

As can be seen on the chart of the S&P500 below we have broken out above the 1170 resistance level which should now act as support. The next level to the upside is the 1200 mark. However, should the market turn lower we have support at the prior area of support/resistance at 1150. The financial sector (XLF)has taken a hit with the freeze on foreclosures and the Bank Index($BKX) has sold off hard the last three days. Technology, on the other hand, has done well up a similar amount to what the financial sector is down. This could be a turning point or simply an area of consolidation. We will just have to wait and see. Click on chart to enlarge.

Gold continues to outperform up nearly 22% for the year. For the week the China market per the FXI was up the most up over 4%. Click on table to enlarge.

Market Summary

Last week was a very good week in the markets and a continuation of the uptrend that began in September. And while September and October are historically the weakest months of the year in the markets the announcement that the Fed will begin another round of Quantitative Easing (QE2) to stimulate the economy has meant that good news is good news and bad news is good news. The worse than expected jobs data released Friday then became good news to continue the rally. The next FOMC meeting is set for Nov. 2-3 and the market is already pricing in an announcement of further stimulus which if it does not get could be cause for a downturn.

The chart below of the S&P 500 shows that we are approaching the next level of resistance at 1170 which we should reach. After that I would say the areas of resistance are the round number 1200 and then the April high in the area of 1220. It is interesting to note that the $VIX again broke below two standard deviations of its 20-period moving average today which has in the past been a sell signal for the market approximately a week later. Will it happen this time we will just have to wait and see. Click on image to enlarge.

The table below shows that gold has outperformed this year up nearly 20% followed by the emerging market ETF EEM up 8.24%. For the week gold was up 2.13% followed by the EEM up 1.76% and the small cap index up 1.20%. Click on table to enlarge.

Market Summary

As can be seen from the chart below we were not able to maintain a closing price above the 1150 level which is where we saw resistance back in January of this year. Resistance levels often take several attempts to break through if we are to go higher. A failure at this level would be noted by a closing price below 1131 and the Volatility Index $VIX above 24. Click on chart to enlarge.

For the year gold is up 17.40% followed by the EEM up 6.37% and the small cap index up 6.12%. For the week gasoline and oil were up the most up 7.83% and 6.68% respectively, followed by the EEM up 2.97%. Click on table to enlarge.