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Market Outlook
The Week Beginning Monday,
September 20, 2010

Preface

I believe that it is important to point out to all my readers, especially those who are not already members of S.O.M.E. (as members are already well-aware of my trading strategy!), that the more volatile the market becomes, whether it trades up or down, is more beneficial to us, as the returns on our options increase dramatically, as observed throughout June and July, so far.

I must say I am a great supporter of the bulls, but will play-along with the bears to extract as much value from our options plays, as possible. I am a great believer in things moving forward and improving as time progresses but I also know that we have to play-the-game to extend our profits. The only catch in this type of market is “knowing” or realizing in which direction it will take, and it seems that we have been able to fulfill this decision in most cases, to gain our profitability.

Key Events This Week



upandcoming

Note:-All earnings dates listed below are tentative and subject to change.

This Week’s Economic Reports

There are still quite a few major economic indicators available this week, which are:-

Monday –

  • September housing market index

Tuesday –

  • August data on housing starts and building permits and,

  • Interest Rates.

Wednesday –

  • Weekly report on U.S. petroleum supplies

Thursday –

  • Weekly initial jobless claims,

  • Existing homes sold in August, and

  • Leading indicators index for August.

Friday –

  • Durable goods orders for August and

  • New homes sales for August


This Week’s Major Earnings Reports

earnings

Monday –

  • Discover Financial Services and,

  • (DFS) and Lennar Corp. (LEN)

Tuesday –

  • AutoZone Inc. (AZO),

  • ConAgra Foods Inc. (CAG),

  • Adobe Systems Inc. (ADBE),

  • Cintas Corp. (CTAS) and
  • Darden Restaurants Inc. (DRI)

Wednesday –

  • CarMax Inc. (KMX),

  • General Mills Inc. (GIS),

  • Bed Bath & Beyond Inc. (BBBY) and

  • Red Hat Inc. (RHT).

Thursday –

  • Rite Aid Corp. (RAD), Nike Inc. (NKE), and

  • Saba Software Inc. (SABA)

Friday –

  • KB Home (KBH).


week ahead



Outlook for This Week

Stocks were higher for the third week, and the S&P 500 has now scored a gain of more than 7 percent for the month, which would be its third best September performance ever if it holds. The Dow gained 1.4 percent this past week to finish at 10,607. The S&P was up 1.5 percent at 1125, and the Nasdaq was up 3.3 percent of the week at 2315. For the quarter to date so far, the Dow is up 8.5 percent and the S&P is up 9.2 percent.

markets091710

While stocks rose on low volume in the past week, the excitement was in the foreign exchange and gold markets. The Bank of Japan intervened to stop the yen's surge, and the dollar finished the week 2 percent higher against the currency. The dollar was 2.5 percent higher against the euro.

Gold was the standout. It gained 2.5 percent for the week and settled Friday at a record $1,275.60 per troy ounce.

One of the big questions hanging over markets should be answered in the coming week, and that is where the Fed stands on further easing on interest rates.

Most Fed watchers do not expect any further extraordinary policy measures to come out of the Fed's one day-meeting Tuesday, but it is being closely watched by investors hoping to see if the Fed will tip its hand on when it might act .With the target Fed funds rate at zero, the Fed has little leverage to push lending rates lower, but one method it would consider using is quantitative easing (QE), or the outright purchase of Treasurys or other securities.

"I don't think we're going to see QE2. I think the data since the last meeting has been kind of muddling along. It hasn't decelerated enough for them to consider additional quantitative easing," said John Briggs, Treasury strategist at RBS.

If the Federal Reserve's view of the economy brightens by just a glimmer this week, it could push the stock market above its four-month trading range.

The S&P 500 closed the week at the higher end of that range, just below 1,130. Some chartists see a break above it as presaging a test of the year's highs.

But options trading suggest some see 1,130 as the market's ceiling and are protecting their portfolios against a decline. Other investors see the Federal Open Market Committee policy meeting as the turning point that stocks have been searching for to break out of the range with conviction.

"Going up to the close on Tuesday, we could see a little bit of enthusiasm, and perhaps it could be the catalyst that could push us above 1,130 on the S&P," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

In late August, Fed Chairman Ben Bernanke said he would need to see a significant deterioration in economic conditions before easing monetary conditions further. Recent data, including a stronger-than-expected reading on private-sector jobs growth, could prevent further action from the Fed.

If the Fed does move, people "wouldn't interpret it as a bad sign (for the economy) but as the Fed being vigilant in trying to keep this recovery going," Jacobsen said.

Most analysts don't see the Fed moving in that direction immediately, but Jacobsen said any signal will be welcome. "It could be the impetus that's needed to push people out of bonds and into stocks, finally," he said.

"I think maybe it's too little, too late, but I think the current Administration, in a wise move, is finally trying to show they do have a pro business side," said Art Hogan, managing director at Jefferies.

"The only thing that really, really could upset the apple cart is if he draws a very hard line on the tax cut issue," said Hogan.

Expectations for this Week

Breakout of Major Indexes?

Introduction

After an impressive Monday morning open, with stocks driven higher by new international banking reform guidelines, September expiration week was a sideways grind. One explanation for the lack of a major follow-through rally might be related to the fact that there was little in the way of short covering related to expiring put open interest.

spx1091810



SPDR S&P 500 ETF Trust (SPY)

With September expiration behind us, we now focus on the open interest configuration of October options, which expire four weeks from now. Taking a look at the SPDR S&P 500 ETF Trust (SPY) as a proxy for the S&P 500 Index (SPX), the number of puts outstanding at the 110 strike in the October series stands out as an area of potential option-related support. The October open interest at the 110 strike is roughly equivalent to the put open interest at the September 105 strike that just expired, and the SPY found support in the 105 area last month.

Also notable is that the put open interest at the 112 strike in the October series exceeds the total put open interest at the September 112 strike. As October expiration approaches, and assuming the market remains relatively stable, we could see another short-covering rally related to expiring October put open interest that pushes the SPY above resistance in the 112-113 area. At the same time, if there is a catalyst that drives the market lower, the 110 strike could act as a magnet.

spy091810



S&P 500 Index (SPX)

It is no secret that the SPX comes into the week trading at the top of a four-month trading range. If the index manages to break above its upper boundary within the next few weeks, it would complete a bullish "inverse head and shoulders" pattern. The May/June lows would make up the 'left shoulder,' with the July low at 1,010 the 'head.' If support holds at 1,040, this would make up the 'right shoulder' in the pattern, with the neckline in the 1,130 area. A bullish 'inverse head and shoulders' play would offer technicians the most reward versus risk, as the possibility of this bullish pattern playing out does not seem to be on the radar of many traders."What is especially fascinating is that this pattern is not being discussed in a lot of media venues, although the bearish "head and shoulders" pattern earlier this summer sparked quite a number of warnings about an impending downturn in the market.

Said another way, if the implications of the bullish pattern are not being highlighted by many traders, it could indicate that few are seeing or playing the market from a bullish perspective. Contrarian investors should take note: the upside trade is not crowded, which makes it attractive. In fact, the crowd may be playing another topping formation in the 1,120-1,130 area -- the "obvious" play to those with a bearish slant -- but also a trade vulnerable to a short-covering rally.

spx2091810



A minor pullback might be the precursor to a breakout. For example, a decline to the 1,115 area would push the SPX down to its 10-day moving average, a trendline that acted as notable support during the advance from the February lows to the April high. But a decline below this trendline might suggest a breakout is not in the offing, with support coming in around the 1,090-1,100 area, and more range-bound market behavior likely.

One notable difference that we are seeing now relative to the two prior ventures into the 1,120-1,130 area since June is indications that hedge funds are seeing value around current levels. This was not even close to being evident in June and early August, according to our option activity analysis. For example, we pay close attention to the buy-to-open put/call volume ratio on major exchange-traded funds, such as the aforementioned SPY. Observation shows that when hedge funds are accumulating stocks, they simultaneously buy index puts for protection, which causes the buy-to-open put/call volume ratio to rise. When hedge funds are not in accumulation phase, demand for put protection drops, and the buy-to-open put/call volume ratio declines. Per the chart below, note that the 10-day buy-to-open put/call volume ratio declined prior to the sell-offs that occurred in the 1,130 area in June and August –- evidence that hedged buyers had no interest in equities at that time. Now, however, this ratio is rising, evidence that they may be attracted to equities at present.

This would suggest a higher-probability chance of a breakout, as investors with an investment time frame beyond a day or week counter the actions of day traders and high-frequency traders playing the short-term, mean-reversion game. The ratio below is volatile and could change quickly, but it has taken on a different tone on the move up to this level. If a breakout occurs, it would be more acceptable to see continued evidence of hedged buying coming into the equity market.

spy091710



Economic News

The Fed

The bond, currency and gold markets are afraid the Fed will start buying gobs and gobs of securities, pushing out more cash to give the economy a boost. The Street name for this is quantitative easing. It's about the one thing the Fed has left to try to get the U.S. economy moving.

The problem is that quantitative easing is viewed as printing money, and the fear is that dollar will collapse. For the record, the dollar is up 4.6% for the year against the British pound and 6.4% against the euro but down 3% against the yen.

So, traders in those markets will watch the Fed statement on Tuesday to see if it will discuss easing. The statement will come out at 2:15 p.m. ET.

The betting is that the Fed won't ease. It won't move the target on its key federal funds rate either. The economy is just too fragile.

But if the Fed does move on this front, expect gold to jump even faster than it has.

Housing

The four big housing reports will probably be dicey. They include:

• The Building Sentiment Index from the National Association of Home Builders.

• Housing starts and building permits for August, due Tuesday from the Commerce Department.

• Existing-home sales for August, due Wednesday from the National Association of Realtors.

• New-home sales for August, due Thursday from the Commerce Department.

There will be a lot of hand wringing about these reports because the numbers are so dismal. Existing-home sales are running at about 25% of their peak in 2005. New-home sales are down by roughly 80% from their peak in 2005.

These are numbers that can't be fixed quickly. They depend on a number of elements:

• Economic confidence and job growth. Those are down right now.

• Available and affordable financing. Rates are low, but lenders are tough.

• Appropriate pricing. Prices are lower in most markets.

• Demand. Are there enough buyers to soak up the supply?

Here's the supply-demand problem in three words. We overbuilt badly.

Between 2000 and 2009, the nation added 13.3 million households -- young people starting out, young families moving up, divorced people seeking to start over, immigrants moving into the country.

The nation's builders added 15.6 million housing units -- single-family homes, condos, apartments. That's a surplus of some 2.3 million dwelling units, 17.3%, over the actual demand.

Add to that simple reality these factors:

• Many lenders made loans they should never have made.

• Some buyers were sucked into the housing trap with assurances that home prices wouldn't fall. And they took out loans they couldn't afford.

• Wall Street was making way too much mortgage money available, especially between 2003 and 2007.

• Many laid-off workers and young people are doubling up with family. There were 1.63 million new households formed in 2007. That rate fell to 398,000 in 2009 and is probably at similar levels this year.

The result is the disaster that erupted starting in 2007 with huge supplies of houses, townhouses and apartments sloshing around, especially in markets like California, Nevada, Arizona and Florida.

The Obama administration has tried to fix part of the problem with mortgage modifications. But the process has been too slow, and many borrowers can't afford their new payments.

More important have been homebuyer tax credits that boosted some sales. But the credits have expired, and sales have slumped since.

These problems have arisen before: in the early 1970s, the early '80s and early '90s. But not to the degree of this housing bust.

It will take time to fix the problem. It will be a big reason why economic growth in the next few years will be tepid.

Initial jobless claims

Claims have fallen modestly for three straight weeks but are still at 450,000 new claims a week. The hope is that the declines will continue.

Durable-goods orders for August

Nomura Securities sees a gain of 1.5%. Some will be due to airplane orders landed by Boeing (BA), but Nomura thinks the gains will be fairly broad.

Conferences of Importance

Among the significant conferences this week are:-

• The UBS Global Life Sciences Conference from Monday through Thursday in New York,

• Goldman Sachs Communacopia XIX Conference from Tuesday through Thursday in New York, and

• Morgan Stanley Business & Education Services Conference on Wednesday and Thursday in New York.

COMPANY NEWS

This Week’s Earnings Expectations

Monday & Friday

Homebuilders Lennar (LEN) and KB Home (KBH) report on Monday and Friday. Both are big players in the Sun Belt and have suffered substantially from the housing bust. Watch the orders and, as important, order cancellation rates.

Tuesday

Adobe Systems (ADBE), Carnival Cruise Lines (CCL) and ConAgra Foods (CAG). Adobe will tell us about the willingness of business to buy new software. While consumer survey results don't always match up with actual spending, Carnival will offer a hint of actual consumer activity.

Wednesday

General Mills (GIS) and CarMax (KMX). CarMax specializes in selling used cars. It will add to what Carnival says about consumer attitudes.

Thursday

Nike (NKE). Nike is a big global player in athletic footwear and apparel. It will have a lot to say about consumers. Investors are optimistic. The stock was up 4.8% this week and is up 10.1% in September and nearly 17% on the year.

INDICATORS AND MARKET CONDITIONS

Investors Intelligence Sentiment Survey

Introduction

Investors Intelligence puts out a weekly Advisors' Sentiment Report, a survey reporting the percentages that are bullish, bearish, or expecting a correction. The poll, which gauges the stock advice of about 150 market newsletters, is one of many indicators we keep an eye on to gauge investor sentiment toward the market. The latest sentiment survey is very clear: there is no consensus by advisors on where this market is going.

Conviction of Advisors

Below is a long-term chart of the Investors Intelligence poll showing the 10-week moving averages of the results. There are a couple of ways to show a lack of conviction by advisors. One is to look at the percentage expecting a correction: it is currently above 30%, a level it has achieved often this year, but not at all in the 10 years prior. Investors Intelligence says that advisors are often in the correction camp before making a switch from bullish to bearish, and vice versa. In other words, a substantial number of advisors are somewhere in between the bullish and bearish camp.

A second way to see the lack of conviction is to look at the difference between the bulls and bears. Note that the difference is very small, as the bulls are declining and the bears are gaining.

mo1-091810



Sentiment Poll Range

As we have just shown, the Investors Intelligence poll shows a large number of advisors with no conviction on where the market is heading. The rest of the advisors are pretty much split in their convictions. Therefore, the three lines in the chart above are all converging. By looking at the range of the results above by taking the difference between the highest of the results (the bulls at 35.6%) and the smallest (the correction camp at 31.4%), the difference between those is 4.2%. As you can see below, this extremely small reading is unprecedented.

mo2-0918110



Since 1990, the range has never been as low as it is now. Therefore, below is a chart that shows the range and the S&P 500 from 1975 up until 1985 (there were no occurrences between 1985 and 1990). The blue dots mark times that the range fell below 5%. You see that the extremely low readings happened more often back then. From a quick glance at the chart, it doesn't seem to be too bad a time to be in the market.

mo3-091810



Below is a table showing how the market did in the six months following a signal above (I take only one signal over a six-month period). Disregarding the most recent signal (in which I show the low, high and overall return since Sept. 3, 2010), we see four of the five returns are positive. The average six-month return in that table is 6.3%, which is not bad at all. The biggest pullback after a signal occurred in 1980. Though the market was eventually up about 10% in the six months after the signal, it first fell 12.6%.

mo4-091810

Implications

The Investors Intelligence poll appears to have bullish implications. Fear is creeping back into the poll numbers, as the bullish advisors are tumbling and the bearish advisors are on the rise -- despite the fact that the market has not been falling, but has just trudged along sideways for the past several months. Also it seems that there is indecision revealed in recent surveys. By drawing parallels between indecision, low conviction and fear, and when others are fearful, it's often a time to buy.

***Further evidence of market conditions can be seen in representations of charts below.

Tracking of SPY, DIA, IWM and QQQQ

Introduction

The markets essentially traded sideways this week as buyers and sellers struggled to make any headway. In the end, they closed at almost the same place where they opened - although thanks to Monday’s gap, they closed a little higher than they did the week before. With the exception of the Nasdaq, the general markets remain in a holding pattern under an important resistance level. Many traders are contemplating a top in this area, but this week’s price action was actually was quite constructive. The markets have refused to give up much ground and Monday’s gap higher remains unfilled. While this is bullish, traders should note that this is very similar to the price action that occurred in early August at these levels. Suffice it to say, the markets clearly rejected this level last time and it remains a key level to watch going forward.

The chart for the S&P 500, as represented by the S&P 500 SPDRS (NYSE:SPY) ETF, clearly shows the established trading range. The boundaries for this broad trading range are $113 and $104. With all eyes on the $113 level above, the breakout will be easy to spot if it does occur. However, traders should also keep an eye on the important levels below. A pullback from these levels would not necessarily rule out an eventual breakout. While the August low near $104 is certainly very important, there are a few possible support areas that can support a mild pullback. The 200-day moving average lies near $111.80 and is one area that could attract buyers. Another area to watch would be near $110. This has been an important inflection point over the past several months and is approximately where the 20- and 50-day moving averages will be in a few days.

spy091710



The Diamonds Trust Series 1 (NYSE:DIA) ETF, which tracks the Dow Jones Industrial Average, is following a very similar pattern to SPY. DIA remains just under the $107 level, and has refused to give up much of its recent gains. While the $100 level remains as a key support level, the $105 level is a closer level to watch. There are two gaps in this area and it is an emotional inflection point on the chart. Many shares have exchanged hands at this level and it wouldn’t be a surprise to see increased action here on a test.

dia091710



In a surprise move, the tech stocks, as represented by the Powershares QQQ ETF (Nasdaq:QQQQ), assumed a leadership role this week. QQQQ gapped above the important $47 level on Monday and continued to move higher each day. By the end of the week, QQQQ had cleared even its June high. This is great news for bulls, as QQQQ has set a higher high and is providing leadership for the general markets. The $47 level is now an area to watch for support on a pullback, but there is also the chance that the Qs' will dip into the unfilled gap just under that level. The next level to watch on the upside is the $49 level, which was an important level back in spring.

qqqq091710



While the technology sector is showing much improvement, the small caps, as represented by the iShares Russell 2000 Index (NYSE:IWM), continue to lag. While the price action this week was similar to DIA and SPY, overall this group is showing relative weakness. While the other indexes are testing their June highs, IWM remains well below these same levels. If the markets are going to break to new highs, this group will have to participate. If IWM continues to lag, it could lead to a failed move from the other index ETFs.

iwm091710



Implications

This week’s price action was very constructive as the markets worked on correcting the recent rally by time rather than price. What this means is that the market is working off oversold tension without any real price movement. This type of price action shows an underlying bid in the market and could be a valuable clue moving forward. The big question facing traders is whether the markets will break above this narrow consolidation or below it. Both scenarios are quite possible and there are plenty of arguments for either case. Because the markets are trading in such a tight range, the eventual break could present a good trading opportunity for prepared traders. The possibility exists for a substantial move in the near future and traders should be ready for both scenarios.





Weak Stocks in a Strong Market

Introduction

It may sound silly to be looking for stocks that are vulnerable to downside in the midst of a strong two week rally, but as a trader, one must always be prepared for any possible scenario. The general markets are pushing up against strong resistance levels and are already oversold as measured by several indicators. Some peripheral indicators such as the McClellan oscillator and the VIX are also signaling that the current rally may be extended as well. While the markets being oversold doesn’t guarantee that they won’t keep going higher in the near term, it does send a warning that the odds of a pullback or pause are increasing.

Often, rookie traders will try to catch the top in stocks during these market conditions, but fading rallies is a very difficult trade to master. Traders are often better served searching out stocks that have failed to capitalize on a rally. These are the weakest stocks and the most likely to resume heading lower when the markets pullback.

The Hershey Company (NYSE:HSY)

The Hershey Company (NYSE:HSY) is a perfect example of a stock that has not participated at all in the recent rally. In fact, HSY has been grinding lower and is testing several month lows. HSY technically remains in an almost 5 month long consolidation after a strong rally that began earlier this year. Despite the fact that it hasn’t broken down from the base, HSY is showing clear weakness in the near term that may foreshadow an eventual breakdown. HSY set a lower low in late July and has not been able to trade back above its 50-day moving average for 2 months. A break below $45.50 would put many holders of this stock underwater and possibly trigger even more selling.

hsy091410



Multi-Fineline Electronix, Inc. (Nasdaq:MFLX)

While Multi-Fineline Electronix, Inc. (Nasdaq:MFLX) may have been able to rise along with the markets over the past two weeks, it was so damaged technically over the past month that the recent bounce is only a small blip on the radar. MFLX had a sharp drop from a large base in late August on an increase in volume and remains well below the breakdown area near $24. It also remains well off its declining 50 and 200-day moving averages. MFLX is currently pausing near its 20-day moving average and appears to be headed back down for a retest of its recent lows under $20.

mflx091410



Rubicon Technology, Inc. (Nasdaq:RBCN)

Rubicon Technology, Inc. (Nasdaq:RBCN) is a stock that not only hasn’t participated in the current rally, it actually has headed in the opposite direction. RBCN had held the $25 level throughout the month of August and attempted to rally off this support level with the bounce in the markets. However this move quickly failed and RBCN headed lower on high volume and remains vulnerable to more downside.

rbcn091410



New York Times Company (NYSE:NYT)

New York Times Company (NYSE:NYT) has been able to rally along with the markets, but much like MFLX, the recent rally has simply enabled a retracement of the prior decline to occur. NYT is currently trading up into prior support near $8.50 and could see sellers reappearing soon. While this would be the first level to watch, there is also significant resistance near $10.

nyt091410



Implications

Even if the markets end up breaking to new highs in the next few weeks, the odds are favoring a short term respite soon. While the respite may be nothing more than a pause, it could be more than that too. In either scenario, the more likely stocks to head lower are the stocks that have been showing weakness despite overall strength in the markets. The stocks above have been underperforming the markets and could make good short sale candidates if the markets do indeed take a breather and pullback from resistance levels.

Conclusion

Technicals

Even with stocks losing a bit of momentum as some technical indicators suggest, the S&P 500 seems poised to move above 1,130. Some chartists see breaking that level as a harbinger for future gains, with overhead resistance not seen until 1,173 and then at the year's high near 1,220.

Having pierced 1,130 three times in the last three months, the level is garnering attention even from investors who are more focused on fundamentals than technical analysis.

"Whenever economic uncertainty bubbles up, that's when technicals take over in terms of what market participants look for," said Wasif Latif, vice president of equity investments at USAA in San Antonio, Texas.

"A lot of people have been looking at 1,130 and we look at it as a component because other people are acting on it."

For the week, the Dow Jones industrial average .DJI gained 1.4 percent, while the Standard & Poor's 500 Index .SPX advanced 1.5 percent and the Nasdaq Composite Index .IXIC jumped 3.3 percent.

Option Trading

The CBOE Volatility index, or VIX VIX.N, continued to show high volume as investors were bracing for volatility.

"After VIX September options expired on Wednesday, I expected that index options activity to drop," said Randy Frederick, director of trading and derivatives at the Schwab Center for Financial Research in Austin, Texas.

"But on the day, there was actually a big volume on puts and calls, suggesting that as soon as September contracts expired, they replaced the VIX contracts again for protection."

A large put spread was made on the S&P 500 index .SPX that suggested a substantial move lower in the short term, according to Chris McKhann, analyst at optionMonster.com.

Housing

In terms of economic data, next week's schedule has a daily dose of housing indicators. From the housing market index on Monday to housing starts on Tuesday, followed by existing home sales on Thursday and new home sales on Friday, investors will be able to get a clearer picture of a key sector that must improve before the economic recovery can really kick in.

"It's been so terrible lately that it doesn't have to be strength -- just a sign of life in the housing market could be support for financial markets overall," Jacobsen said.

Vulnerability

On four straight days, there will be reports about the rocky state of housing, and the Federal Reserve will meet Tuesday on interest rates and will note that the economy is still slowing.

If the stock market survives those four days, the rest of the month may not be too bad. In fact, for all the attention paid to gold (up 2.2% for the month), the (SPX) is up 7.3%.

All 30 stocks in the Dow Jones Industrial Average (INDU) are higher, led by General Electric (GE) , Caterpillar (CAT) and JPMorgan Chase (JPM), up 12.5%, 12.3% and 10.2%, respectively.

So are 99 stocks in the Nasdaq-100 Index (NDX.X), which is up nearly 11%, led by Expedia (EXPD), Oracle (ORCL) and NetApp (NTAP), up 25.8%, 25.1% and 21.5%, respectively. Apple (AAPL), which represents 20% of the index, has risen 13.3%.

Despite that cheer, there are technical reasons to worry about the market. Since Aug. 26, when the Dow closed at 9,986, the blue chips are up 6.2%, with the S&P 500 up 7.5% and the Nasdaq Composite Index (COMPX) 9.3%. Those are big runs, which make the market vulnerable.

Plus, the S&P 500 hit 1,131 on Friday morning, roughly its high in June and August, and promptly fell back. That's profit-taking at work.

But if you're a bull, you note that the Dow, S&P 500 and Nasdaq are trading above the 50-day and 200-day moving averages, both signals of at least some confidence.

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