Fri, Oct 14, 2011 4:32 PM – Nice Week for the Market

The market has put in a 9-day run from the bottom of the recent trading to the top with only 2 or 3 days in that run that were basically flat. There was not one down day of any significance. The market is up 11%+, 15% if you go from the low intraday on 10/4. In the short term, technicians are calling for this run to top out anywhere between here and another 4% higher.

Runs of this type are truly rare and only start during periods of extreme pessimism as we saw at the end of the 3rd quarter. If it is the start of a more extended run that lasts months there probably will not be a down week of much significance for awhile.

It was the combination of being oversold and getting some good news on the economy, though certainly mixed with poor reports, and the consensus coming around to the idea that European leaders are serious about getting a concrete plan in place to bail out the European banks and deal with a Greek bailout.

There are plenty of skeptics on the latter who say they will believe European cooperation on spending probably as much as €440 billion to recapitalize the banks. The Germans, tired of bailing everyone else out, want each country to recapitalize its own banks and France apparently agreed to that but it will probably be a combination of a Eurozone bailout package, the national governments and the IMF. The IMF includes the US as its largest member and Obama Administration, ever ready to spend money has said it would help, too. A concrete plan is supposed to be in place in a couple weeks.

In the US, some economic numbers like today’s retail #s were better than expected. Having some reports come in better than expected is a welcome change from August and September when all the surprises seemed to be on the downside.

DO NOT EVER DOUBT THE ROLE OF EMOTION IN THE STOCK MARKET!

Our accounts are very roughly 30%-40% in stocks for conservative accounts, 50%-55% for moderate accounts and 60%-65% for aggressive accounts. Most have an additional 10% in gold and have the balance in cash and bonds of various types.

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