Friday close Dow -9.36 at 12002.37, Nasdaq +1.36 at 2342.30, S&P +1.64 at 1368.60

The Dow put in the forth green weekly candle this week and it had not done that since last October/November when it put in five in a row so not such a huge surprise for this typically good time of year but it is on the back of a run up that started in July so that is a surprise.

We have not yet seen a good clue that we are about to see a decent pullback into the 4-year cycle low and there is no guarantee we will see it but it has worked for at least the last 24 years so we still expect this cyclical pattern will play out before the year is finished.

Overbought markets can get more overbought but that does not lessen the risk. For your longer term holdings pay attention to their charts and set some trailing stops.

StockTiger had 22 stock picks hit buy points this week and they all made money on the first day and many continued after. Of those stocks only one closed the day lower then the buy price (by 7 cents) so this still shows a very strong market for break out or pullback plays as buying every stock at its buy price returned a very nice profit.

This Dow chart shows very little backing and filling and it is quite a ways above the 9-day EMA. It is still earnings season and as expectations were not set too high a big percentage of S&P companies have met expectations or exceeded so that kept this rally going. There is fear again of the Fed raising rates and the yield curve is still negative but in this period people just forgot about those things that worried them so much a couple of months ago. 

Often I am watching a stock and someone sells a block and the bid drops and right away the ask also drops in most cases. If they are shorts I understand but if they are frightened longs then it is always a strange thing. If you want prices to go up you raise your ask not lower it. So the Dow as an example had no one interested in June/July but gradually as prices got higher buyers came in and now that most of the stocks gained a great deal it excites even more buyers as most love, it seems, to buy the tops and sell the bottoms. As you know we buy a lot of break outs also but are quick to lock in some gains. We prefer to buy when stochastics are in the 20 area and sell at 80 area for better gains and lower risk.

Elections are still 2 weeks away and they may stop the rally if it is still going or put in a capitulation top when the last of the buyers finally decide they need to rush in. I say that as it just looks too extended now unless it can pull back and consolidate a while.

I start with a lot of charts then try to trim the number but they all add to the overall view and each reader has their own ideas while viewing them.

The Nasdaq 100 is almost back to its high of the year as still looks ok but stochastics are again high so a drop below 80 will be a warning.

The S&P 500 must be on fumes as it is so near the top channel and volume not increasing while RSI almost at 70..

The Nasdaq composite also close to its year's high and you may notice how similar the pattern is to an earlier time. Look at the highs of January 2004, January 2005 and around August 2005 and three times it failed at that level before finally breaking above late in 2006. This is the second try at the 2006 high and it may fail also this time.

Here is a closer view of that chart.

The NASI however has broken above its trend line so there is strength but notice the MACD has turned down and in the past this warned that the NASI would follow. We will watch for a test of the trend line to see if it holds. If it does then that would be quite bullish.

We did say that if the BPCOMPQ broke above the 62% then it has a good chance of hitting the high so the next two weeks will let us know.

The semis though are not acting well at all and they are needed for the Nasdaq to gain traction.

The Russell 2000 we like to see it gain as we play a lot of these stocks. While it has gone up from July it has made a very nice pattern of backing and filling that washes out the weak so this may reach the highs again and earlier in the summer we though it may have reached its peak for quite some time as the larger caps took over.

Here is the 15-min chart I refer to in playing the Russell 2000 futures as it dropped to the trend line on Friday. When you have some pretty clear trend lines this is a nice future to trade as it pays $100 per point per contract and you only tie up about $1,800 per contract so  super percentage gains if you wait for a good setup.

These two charts show why caution is suggested for those who hold for a few months and want also to limit draw downs.

This is the NYSE advance-decline line and you see the advances have been much greater and this is a big and very steep move.

If you then look at the total volume of these same stocks you see the volume has not even reached the height of the Spring move.

The percentage of stocks above the 50-day are also at a warring high level. This does not mean an immediate pullback but you can see from the past it is a notice that a pullback will come not too far off.

This week we had one gold stock on our list and it did well on Friday RNO but we looked at 75 mining charts and really only found one additional one to watch right now. There have been a few that made good gains in the last couple of months but the sector itself is not ready for our style of low risk buys. It may take months more so we will only play ones that have a good risk/reward entry.

Here is the long term Gold sitting above the 65-week average and the 38% retrace. A break out would draw our attention but for a long term play a deeper pullback would be very nice.

A closer view of this trend line.

And the 60-min chart of the ETF for gold mining stocks and a small ration chart above so we would want to see the top green line go up and outperform gold metal.

And the ratio chart of the XAU to gold and the best buy is  when the 50-day crosses back above the 200-day.

Oil still consolidating and many have bought oil stocks back but this chart would need a change also and it may instead be a move lower. There is positive MACD divergence (not shown in this chart) but it is not a good timing indicator.

The US Dollar hit resistance this week and got turned back but has support at 86.

A quick look at some sectors we pointed out out before to review their progress.

To remind you that you can check the components of each of these sectors at Marketwatch.com  Dow Jones U.S. Sectors index here

Healthcare - a chart with a pattern we like to see. A lot of backing and filling and sideways consolidation as it move up so it can gain better long term strength. As support gets tested and hold many times it builds confidence so instead of wanting out on dips people look forward to them as buying opps.

Who would-a thunk - When we showed the Fixed Line telecom we set a reasonable measured move target at  first but as it gained the trend line held and it made yet another break out this week.

The Food and Beverage sector looks good right here if it break above the little trend line the the horizontal a bit higher. Those sector stocks are here

Specialty chemicals still look ok.

And electricity made another big break out but think it is short term overbought now.

Another big mover and a place to look for shorts when the market pulls back as this is much too vertical. Looks a lot like the run up into January 2005. That sector is here

I did not draw it but you can see the 290 level is also horizontal resistance in the steel sector so one to watch as it has made nice recovery so far.

Computer hardware has made a stunning move from the July low but yikes is it vertical and I bet there has been a lot of short covering to get it here. The sector is here Some of the stocks can still be break outs but if we get our 4-year cycle low pullback then this sector also one to look for shorts.

Heavy construction now at a trend line so interesting on a break and then horizontal resistance at 345 area - some names on the chart and the sector here

This is it for the broad sectors and now to some individual charts. Maybe we have too many on our watch list now but if you do not like some them take them off your list.

Lenka pointed out this one BVX we played in the past as it now has a nice flag formation. This is not as straight forward a setup but a nice high volume up move could take it to the August High in one day. (someone asked about the names mentioned on the picks sometimes and in the newsletter. They are members in the chat room or message board who pointed out stocks so we like to mention them when we can)

RNVS has a few layers of resistance overhead bit rather like this setup on a good break as it is also at the 200-day.

MNG another miner and we had good luck with RNO so maybe this one will also give us a move above $4.70.

KERX has already made its first little break but above the $15 are look like it could be a good trade.

HHGP I really like the looks of this one - kind of cup-handle-ish and will want it above $11.52 to 12.40 then maybe the 200-day at $13 but first we need the first break out.

WPTE is not the killer type of W bottom pattern but it is a W just the same. (when there is an E and the end of a symbol it means they have some reporting problem - like being late or something so it is a warning in any case) The $4.50 price is horizontal resistance as well as the trend line so a break above the two is bullish.

Now the economic calendar for the week.

Let's again look back to other 4-year cycle years... 1986 was 5 cycles back and see how it rallied from July to September then made its low in October then started it big move.

The 1994 year only 3 cycles back had a nice rally going into November then dropper into December when it made its big me. On average the market gains are 50% from the 4-year cycle low so we hope we have not put one in yet but will have  nice pullback for a month of so. Note: This chart shows the a 4-year cycle low does not have to be a low in price. It is the point at which the market has made its last low for that time not the lowest low. So for us to still get a 4-year cycle low does not mean that.

I saw this somewhere and shows the "smart money" big players vs. the dumb money small payers- quite a divergence of confidence at this point with the smart money only 29% but they are buying still so this must show that they may be also willing to exit if it gets too weak. We still could see a capitulation rally where the buyers still on the sideline finally enter or a larger short covering rally caused by large margin calls as the shorts get squeezed and in that case the Smart Money would not look so smart.