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Market Outlook

The popular averages resumed their charges to the upside on Thursday. The third quarter gross domestic product was reported higher than expected. Jobless claims were up a bit last week but still at a low level. Visa (V +10.2%) and MasterCard (MC +9.4%) both surged on better than expected earnings, which may be seen as a good sign for the overall economy. Meanwhile, the  prices for crude oil and gold fell on Thursday.

   Above is my 3-month chart of the S&P 500 exchange traded fund (SPY). Following an all-time high reached on September 18, the price retreated into early October. After a rocky attempt to rebound, the price plummeted into mid-October. Roller coaster moves on October 15 & 16 accompanied by heavy trading volume and a high volatility (VIX “fear”) index may have marked a washout of panicked investors who had been advised by pundits to flee the market. That switched my outlook arrows back to green. The October 21 spike rise above the 200-day moving average was most encouraging. After a retreat the next day, the price jumped on October 23 & 24 to nearly tickle the 50-day moving average. The sharp move above on Tuesday may have signaled more clearly that the cool weather bull has already been unleashed. Moving further above on Thursday provides encouragement to think that the all-time high set in September could could soon be surpassed.

   The recent high volatility and trading volume may have heads spinning. Those who become especially dizzy often get flushed out at market lows during Octobers. This may have caused a great many Baby Boomers (b. 1946-1964) and their elders fearful for their retirement nest eggs to now be sitting in fixed income investments that pay next to nothing. Those who sold stocks recently may have done so near another typical October market low. Now they are sitting on a horde of cash that could fuel the usual extended rally during the cooler half of the year.

   Meanwhile, the Millennials (b. 1982-2004) appear to have started to gain interest in stock market investing, especially in companies with innovative 21st century products. I may be very slightly older than the Boomers, but I see opportunities more in the manner of the young adults.

   Normally there must be an emotional component to set up a meaningful bottom. Fear of the spread of Ebola might have been that scare factor. That particular concern may be abating as investors now review the parade of corporate earnings reports. They may have also started to realize that the end of quantitative easing implies a steadily improving economy.

DISCLAIMER: Our commentaries are provided as general information and not investment recommendations. You are responsible for your own investment decisions. Our opinions are based on historical research and data believed to be reliable. There is no guarantee that results will be profitable. We are not responsible for errors or omissions. We may hold positions in vehicles that are mentioned.

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