Bulls, look for this all clear signal

The equities markets posted solid gains in what was
another rather volatile week of trading.
  Despite the solid advance,
market conditions were pretty trendless as little in the way of follow-through
materialized from day-to-day.  On Monday, the markets rallied on news that Fed
clone Ben Bernanke would be taking over as Fed Chairman in early 2006.  However,
those gains were given back in the following 3 sessions.  Stocks rallied on
Friday despite a number of lackluster earnings reports in the Tech space. 
Energy shares were the standout sector to the upside, while Chip names lagged. 

The December SP 500 futures
closed out the week with  session a gain of +16.00 points, while the YM finished
with the same relative gain of +165 points.  On a weekly basis, the ES posted a
market structure low and settled right at its trend line that it broke last
week.  The YM also posted a market structure low and ran into resistance at its
10-week MA.  Looking at the daily charts, both contracts posted a market
structure low and are testing the upper end of the past 2 weeks’ range.  For you
daily 3-Line Break followers, nothing has changed as the ES remains long with a
Break Price of 1178.50, while the YM remains long with a Break Price of 10216.



As the
month of October comes to a close, the equities markets are now entering what
has historically been regarded as the most seasonally bullish time of the year. 
In recent months, the key indexes have not acted too well.  However, on the
other hand, given the continued Fed rate hikes, the powerful hurricanes in the
Gulf, and persistently high energy prices, one could also conclude that equities
have actually held up quite well.  Given this performance in the face of so many
head-winds, a case can be made that a lot of bad news could already be priced
into stocks on a near-term basis

The only
caveat remains whether or not the Fed will continue to maintain its hawkish
posture.  Without some sort of indication that the tightening cycle is
concluding, any possible year-end rally will likely be limited to some degree. 
On the other hand, if the Fed were to even hint that it’s done raising rates, it
would likely be regarded as an “all clear signal” by the markets. With the next
Fed meeting on tap for Tuesday, we won’t have to wait long to obtain some
guidance on what the Fed plans to do in the near- term. 


Please feel free to email me with any questions you might have, and have a great
trading week!

Chris Curran