The market rose modestly again today with the Dow sitting at a fresh new high for the year. For the week, all three major indexes are up by at least 4%, essentially erasing losses from the previous two weeks. Being a keen student of financial market history, I certainly won’t forget that exactly two years ago on October 9th 2007, both the Dow and the S&P 500 were at their all-time high. Then one year ago on October 9th 2008, the market was in the middle of the worst week since 1914. On that day, more than 3000 issues on NYSE and Nasdaq hit fresh 52 week lows. In case we forget, the new highs on NYSE hit a new 2-year high yesterday. It is always said that October is a little special for stock investors and that is probably an understatement based on past two years’ experience.

Most major sectors finished the session higher led by technology and industrials. The CRB commodity index dropped 0.5%. Gold retreated a bit after hitting record levels in each of the past three sessions. The US dollar was higher against all major currencies. Treasuries declined as the yields rising. The three-month US LIBOR was unchanged at 28 bps. The VIX index dropped more than 1 point. The market breath was positive on both NYSE and Nasdaq. The volume was lighter compared to the previous session.

The market rose modestly today with both the Nasdaq and the S&P 500 extending their gains to a four-day streak. Better-than-expected earnings results and economic data were behind today’s rally. Retailers in general posted stronger-than-expected same store sales for the month of September. Initial jobless claims, meanwhile, declined to 521K vs. 540K expected. Continuing claims also fell 72K to 6.04 million. Alcoa unofficially kicked off the earnings season yesterday after the market closed. The company beat Wall Street expectation by a wide margin for earnings. It also beat revenue expectations. However, the stock merely rose 1% amid very heavy volume. It shows that most of the upside surprise has already been priced into the stock. One major reason that stocks rallied nicely during the second quarter earnings season was the low expectation heading into that season. On contrary, bars are set much higher in the current earnings season and unless companies offer good guidance, I expect more of such sell-on-the-news activities in the next few weeks.

All 10 major sectors finished the session higher led by basic materials and energy. The CRB commodity index rose 2.1%. Gold closed at a new record high. The US dollar was lower against all major currencies. Treasuries declined as the yields rising. The three-month US LIBOR was unchanged at 28 bps. The VIX index was little changed. The market breath was positive on both NYSE and Nasdaq. The volume was heavier compared to the previous session.

The market had an extremely quiet session with the Dow moving in a range of 60 points for the entire day before closing lower by 5 points. But given the strong gains in the previous two sessions, it is not bad for the bulls. After the bell, the Dow component Alcoa kicked off the earnings seasons by announcing better-than-expected top-line and bottom-line results. There is some debate in the financial industry these days about the percentage of stocks investors should hold in their portfolios. The traditional view is usually 60/40 and will move based on one’s age. So stocks take 60% of the weighting. But after the stock market moving nowhere for more than a decade, some are arguing for 40/60 or even 30/60/10. In particular, PIMCO’s Bill Gross and Mohamed Ei-Erian thought that the stocks would continue to move nowhere in the coming decade. Bill Gross, as we all know, is regarded as a “Bond King” for his unbeatable performance in the $180 billion PIMCO total return fund. However, as far as equity is concerned, I’m not too sure about his credibility. I remember back in 2002 when the Dow was traded towards 7,000 points following the burst of the tech bubble, he was talking strongly about Dow 5,000. Although I don’t have a crystal ball about where the market will be ten years later, one thing I learned from studying financial history for the past eight years is that the majority is usually wrong. Do we need an example for bonds? According to Ibbotson Associates’ index, long-term government Treasuries had its best year in more than a decade in 2008 by returning 26%. In the first eight months of 2009, however, the index lost 11.5%. Investors, meanwhile, poured almost $210 billion of new money into fixed-income funds over the same period vs. $32 billion of net inflows for the whole of 2008.

Most major sectors finished the session little changed. The CRB commodity index dropped 0.3%. Gold closed at a new record high. The US dollar was mixed against all major currencies. Treasuries rose as the yields fell. The three-month US LIBOR was unchanged at 28 bps. The VIX index dropped 1 point. The market breath was mixed on both NYSE and Nasdaq. The volume was lighter compared to the previous session.

The market advanced strongly for the second session in a row with all three major indexes finishing higher by at least 1.3%. The stocks are now getting back what they lost in the previous week. However, it is the record gold price that grabs most of the headline news. If we don’t take into account of inflation, the gold is now sitting at the highest price ever although it is still much lower than the inflation-adjusted peak of around $2300 per ounce. We have discussed about the rise in the gold price before. And in my opinion, it is driven more by liquidity than by the weakness in the US dollar. Of course, today the latter seems to be the main reason for the record setting. Overnight, the Reserve Bank of Australia caught almost everyone off guard by announcing a raise of 25 bps in its benchmark interest rate. The move is the first among major economies and is likely to be the first of a series more that will follow. Due to the interest rate difference between the US dollar and the Australian dollar, it is logical to expect weakness in the US dollar. In addition, the US dollar is also under pressure from a report in London’s The Independent, who noted a meeting held by the Gulf States, China, Russia, Japan and France to “end dollar dealings for oil, moving instead to a basket of currencies including the Japanese Yen, the Chinese Yuan, the EUR, gold and a new unified currency planned for nations in the Gulf Co-operation Council.” Although such talks are not new, it nonetheless makes investors worried about the dollar’s role as a reserve currency.

All 10 major sectors finished the session higher led by basic materials and energy. The CRB commodity index rose 1.3%. The US dollar was lower against all major currencies. Treasuries rose as the yields fell. The three-month US LIBOR was unchanged at 28 bps. The VIX index dropped more than 1 point. The market breath was positive on both NYSE and Nasdaq. The volume was heavier compared to the previous session.

The market started the new week strongly with all three major indexes finishing the session higher by around 1%. This is going to be a light week in terms of economic news. The earnings season will unofficially kick off on Wednesday following the Dow component Alcoa’s earnings. But the majority of companies won’t release their results until next week. Top-line revenue growth will be a key to watch in the upcoming earnings season. We had some better-than-expected economic news today. The ISM service index rose to 50.9 in September from 48.4 a month ago. A reading above 50 usually signals growth and the index hasn’t seen a number above 50 since August 2008. However, we should note that the current economic recovery is likely to be led by business spending. Therefore, reports such as manufacturing activities and industrial production will be of more importance.

For the week ending on Oct 2, most major indexes continued to show bullish stance despite dropping for two consecutive weeks. Several importance indexes, including the Dow, NYSE and the S&P 500, are very close to their 50-day MAs. A rebound should be expected if the current bull market trend is intact. In addition, we should note that some time late this week, the Dow will be higher than where it was a year ago for the first time in nearly 18 months. Although it might not seem important, we would like to point out that during the last bear market between 2000 and 2003, the Dow made such showing on July 1, 2003. Since then, the index rose continuously for more than 4 years until the current bear market hit. Another great example came from the Great Depression. The Dow couldn’t make a positive comparison until April 19th 1933. The Great Depression, as we all know today, happened to end at that time.

Sectorwise, for the week ending on Oct 2, drug stores and Brazilian stocks were among the best performers in our proprietary database. The former was helped by better-than-expected earnings results from Walgreen while the latter was aided by Rio de Janeiro successfully getting the rights to host the 2016 Summer Olympics. Airlines, steels and home builders were among the worst performers.

All 10 major sectors finished the session higher led by basic materials and financial. The CRB commodity index rose 1.3%. The US dollar was lower against all major currencies. Treasuries rose as the yields fell. The three-month US LIBOR was unchanged at 28 bps. The VIX index dropped more than 1 point. The market breath was positive on both NYSE and Nasdaq. The volume was lighter compared to the previous session.