GMI: +4; Reversal coming?; Next week shoud tell

The market internals reversed Thursday and showed unusual strength.  The GMI rose to +4 and could rise to +6 with another advance tomorrow.  There were 240 new yearly highs in my universe of 4,000 stocks and the percentage of stocks in a short term up-trend has gradually risen from a low of 24% on 9/26 to 29% on Thursday.  Gmi929_1 The percentage of stocks closing above their 10 week average has risen from 37% on 9/23 to 47% by Thursday.  Between 78-83% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes advanced on Thursday.  There were 105 successful 10 day new highs.

I am still cautious about this rally because it is occurring at the end of the quarter.  Mutual funds may be loading up on recent winners in order to look smart when they release their 3rd quarter portfolios.  (This tactic is called window dressing, because the unsuspecting investor cannot tell the exact date that these shares were acquired and the fund manager appears smart to have bought these winners.)  I am still inclined to wait until next week to determine the market’s probable direction.

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