The markets would appear destined to move higher, at least in the short term,  as almost everyone believes that the Federal Reserve will now undertake further "quantitative easing". The trigger is the disappointing employment numbers and the Fed's mandate to promote full employment.

This is being called the "Bernanke Put" which follows what is known as the "Greenspan Put" and refers to the Fed increasing liquidity and thereby virtually guaranteeing that there will an inflation in asset prices (including equities). The likelihood of further quantitative easing was implied in the statement released after the last FOMC meeting ("is prepared to provide additional accommodation if needed") and we will know after the next one (November 2). Until then stocks are likely to trend higher, although valuations certainly already have some of the anticipated stimulus priced in.

Whether or not the continuation of the "Bernanke put" will achieve its objective of resuscitating employment is a controversial one. One commentator, Peter Brookvar, contends that it was these policies that created the 2008 recession in the first place. While we find his argument persuasive, his solution, the market based setting of interest rates, is unlikely to happen without the dissolution of the Federal Reserve!

It's also possible that the FOMC will not announce "additional accommodation" in November. Although private sector employment is growing slowly, it is growing (the economy created 65k jobs in September). The dollar would fall even further putting the trade balance in an even worse situation and further raise the cost of imports. (The Fed conveniently excludes food and energy from the CPI so it can pretend there is low inflation). Also, one member of FOMC, Thomas Hoenig,  voted against the current policy at the last meeting.

Earnings season started this week. I expect earnings to be mostly in line with expectations and that they will have little effect on the market direction.

The housing market recovery took a hit this week with the revelations of fraud in the foreclosure business. It seems the mortgage lenders are showing as much attention to detail in foreclosures as they did in writing loans in the first place. The breaking scandal has the potential to stress the banks further, force housing prices lower, and delay the recovery of the housing market. Most distressing is the evidence that the financial sector has not changed its pillaging ways. I found Barry Ritholz' explanation of the underlying causes scary but illuminating as I had never heard of MERS before. I was relieved to find my own mortgage was not listed there.

No new features this week.

In our weekly commentary we usually pay most attention to the trend in the NASDAQ Composite in the belief that most breakouts occur on that exchange. Although we felt anecdotally, that that was true we never actually did an analysis to verify it. Today we correct that oversight.

Our database at any one time holds approximately 6500 stocks. This number varies up or down as companies come and go but is reasonably consistent.

The data base is overweighted in NYSE stocks compared to the NASDAQ. The breakdown by exchange is:

Exchange	Presence in Database
NYSE	51%
NASDAQ	42%
Am Ex	7%

However, the confirmed cup-with-handle breakouts are heavily weighted in favor of the  NASDAQ:

Exchange	Confirmed Breakouts
NYSE	43%
NASDAQ	54%
Am Ex	3%

While we don't expect you to factor this into your stock selection, that is choose a NASDAQ stock over a NYSE stock, I think it does give some insight into which index is the more important one for our purposes. Incidentally, its the NASDAQ trend that is used in our cup-with-handle backtest tool.