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Stocks gapped up on Monday morning, mainly because Larry Summers decided to withdraw his name from the list of possible replacements for Fed Chairman Ben Bernanke. The emotional open was met with some selling later in the day as the indices closed well off their highs and ended the day mixed. The Dow ended the day up 119-points while the Nasdaq closed in negative territory because of a sell-off in Apple.
Last week, I showed you a chart that revealed seventeen weeks this year when total stock allocations from the auto-tracker fell from the previous week. The accuracy rate for stocks to fall after a weekly drop in stock allocations was only 24%. And stock allocations were down 6.78% at the beginning of last week, which was bullish by this measure. And so the market rallied on those odds again. This week, allocations are down once more. And so the odds favor more upside. Here's the charts:
Stocks rallied again on Friday closing out one of the best weeks of the year, during historically the worst month of the year. The Dow gained 75-points while the S&P and small caps saw slightly lower gains percentage-wise, and the I-fund lost a bit of ground.
During what is supposed to be the weakest month of the year historically, stocks had another great week adding to some impressive gains for the month of September. Some were calling it a relief rally after the threat of a strike on Syria subsided, and if that is the case, it may be an overreaction. What is coming down the road looks a little unnerving but investors don't seem all too concerned, although trading volume has been light indicating a possible stay back and wait approach.
Stocks took a break yesterday after three consecutive triple digit gains for the Dow. The initial jobless claims report came in better than expected, and living in Bizzaro World, where bad news is good news, and good news bad, the stock market paused in front of next week's Fed meeting where strong economic data could threaten investor's $85 billion QE. The Dow lost 26-points.