TheTradingReport

MORNING MARKET COMMENTARY
for Monday, October 12, 2009
Dow Marks 2009 High Close on 2-Year Anniversary Of Historic High

The major averages bounced off support this week as the bulls showed up and quelled the latest round of selling pressure. Volume was reported lighter, revealing no great buying conviction or further distribution from the institutional crowd. Advancers led decliners by a 3-to-2 ratio on the NYSE and by a 2-to-1 ratio on the Nasdaq. The recent expansion in the new highs list is another encouraging sign of healthier market action, as any sustainable market rally requires a healthy crop of strong leaders.

PICTURED BELOW: The Financials Sector Select ($XLF +6.65%) posted 5 consecutive gains and rallied to new 2009 highs, which bodes well for the current market rally (the M criteria). Many firms in this industry group have endured huge losses in the past year or more which hurts their annual earnings histories (A criteria), making the stocks not meet all of the investment system guidelines. However, the ongoing strength of the financial group serves as a very important leading indicator concerning the overall market outlook.

This is the excess liquidity environment we’re now in again. There’s too much unproductive money sloshing about trading desks—meaning bank beneficiaries are trading and not lending. Further, ridiculously low yields frustrate even conservative investors causing them to seek higher returns and accept greater risks. The result is another asset bubble. That’s the message from gold and other hard assets which too may be in a bubble. Certainly stocks are in a bubble with the S&P 500 up 60% from the March low of 666.

The bear market rally will soon be over. It rallied 1,400 Dow points more than it should have. There are many reasons as to why this is in process, including from Dr. Doom HERE. The rally induced many investors to stay long and they did recoup as much as 80% of their losses in some instances. Now it is time to exit and move into gold and silver shares. Probably the biggest key is that gold recently spent two weeks above $1,000 and I believe gold is prepared for a breakout that will take its price anywhere from $1,200 to $1,700 an ounce. Gold’s long-term reverse head and shoulders pattern, one of the most powerful patterns in charting is in a breakout mode.

Bloomberg Futures

How Different Investments Performed Last Week

Media Digest 10/12/2009 Reuters, WSJ, NYTimes, Barron’s from 24/7 Wall St.

The Trend Trader for Monday, October 12th

Sector Update for October 12th from Dr. Brett

Wall Street Breakfast What you need to know in early trading today.

7 Stocks You Need to Know for Monday TradingMarkets.com

Stocks in focus for Monday Marketwatch

Put your cash in a Safe Place

International real-time economic calendar

I don’t make jokes. I just watch the government and report the facts. — Will Rogers

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Monday Morning Market Comments and Links (for traders)