The Week Ahead: A falling long bond yield coupled with the drop in the price of oil spurred the best 3rd quarter performance in 11 years for the blue chips. Will this drive stocks even higher or will the slowing economy halt gains? Monday, a report for construction spending is released. Tuesday has auto sales numbers. Wednesday brings factory orders as well as a closely watched Ben Bernanke speech. Weekly jobless claims and chain store sales are out on Thursday, but the most important report will be released Friday regarding September employment.

Stocks to Watch: Smith International (SII) replaced Golden West Financial in the S&P 500 and could work higher with a rebound in the oil price. Boeing (BA) received a large order from Dublin based Ryanair for $2.25 billion but the stock looks top heavy near 80. Research in Motion (RIMM) broke through a $100 a share, an all time high, on solid 2nd quarter earnings and increased 3rd quarter guidance as sales of Blackberry devices continues to be hot. Eastern Company (EML) a manufacturer of industrial hardware declared a 3 for2 stock split.

Special Note: As the DJIA tests its all time high, many intermarket divergences continue to occur. The S&P 600 Small Cap Index and S&P 400 Mid Cap Index are beneath there May and July highs. The Dow Transports and Dow Utilities are lagging badly. The cumulative advance decline line of the S&P 500 remains well below its March 17 top. The number of new highs has been contracting since May and only two Dow stocks are at all time highs (AXP, PG). This kind of fractured market demands caution as the probability of a sizeable correction increases.


Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

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