The Week Ahead: A profit warning from Caterpillar on Friday has opened the door for concerns that the market has come too far too fast despite overall corporate profits being strong. Economic news this week will focus on the FOMC two day meeting on 10/24 and 10/25 culminating in a decision on interest rates. The existing home sales numbers are released Tuesday while Wednesday brings durable goods and new home sales. Finally, GDP for the third quarter is out on Friday which should give a clearer picture of the economy's strength.

Stocks to Watch: Weak housing and small machine sales contributed to the cut in outlook for this year and 07' for Caterpillar (CAT) a Dow stock which may be a harbinger of things to come given the housing industries share of the economy. Google (GOOG) reported strong earnings and its price target was raised by many analysts. A break above 475.11 could open the door for considerable upside. After making significant progress from its July low, Sandisk (SNDK) took a sudden turn for the worse after reporting lower earnings and gross margins.

Special Note: Bullish sentiment has reached such a fever pitch that the Daily Sentiment Index (DSI) has registered 15 straight trading days of 90% or higher, a never before reached summit in the 19 year history of this data including the entire decade of the 90's. Readings of this caliber suggest the market has factored in the rosiest of scenarios for stocks and that the slightest disruption whether economic or otherwise could cause a sudden downspout in prices. Positions should be carefully chosen, hedged, and well diversified and profits taken where applicable.


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

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