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Sandy Forces QE Fatigue in Remission

Stocks in this article: XLB XLY XLI XLP XLE XLK

NEW YORK ( TheStreet) -- The stock market rallied on Thursday as economic data came in better than expected.

Initial jobless claims was below expectations at 363,000, but remember that claims need to trend below 350,000 to take the labor market out of recessionary territory.

The Institute for Supply Management manufacturing came in at a modest 51.7 in October, a slight expansion.

The Conference Board's reading for consumer confidence was 72.2 in October, the highest reading since February 2008. While the trend is positive keep in mind that readings between 90 and 110 are neutral. The current reading thus tells us that consumers are less pessimistic.

Construction spending rose 0.6% in September to the highest level since October 2009, but this pace is well below what a healthy construction sector should be. Stocks in this sector have become extremely speculative and at we show that the construction sector is 19.5% overvalued. Other sectors that are overvalued by double-digit percentages are: retail-wholesale by 12.8%; finance by 11.9%; consumer staples by 11.7%; medical by 11.3%; and utilities by 10.7%.

Friday morning look for nonfarm payrolls to rise 125,000, but the unemployment rate is more important in front of next Tuesday's presidential election. Will the rate be above, below or on 8.0%? Under helps President Obama. Higher should help Gov. Romney.

This week's earnings reports have continued the trend where most companies miss on the revenue line.

In sum, the overall economic picture, equity fundamentals, the weekly chart patterns, and the location of my risky levels, do not justify significantly higher stock prices. Here are the technicals for the U.S. capital markets.

Analysis of the Yield on the 10-Year Treasury Note (1.719%): The weekly chart is neutral with flat momentum and the five-week modified moving average at 1.713%. My quarterly and annual value levels 2.109% and 2.502% with my semiannual pivot at 1.853% and monthly and semiannual risky levels at 1.452% and 1.389%. The trading range should continue between 1.853% and 1.452%.

Analysis of Comex Gold ($1,714.80): The weekly chart for gold will be downgraded to negative on a close Friday below the five-week MMA at $1,727.40, as momentum falls out of overbought territory. My semiannual, monthly and annual value levels are $1,643.30, $1,639.80 and $1,575.80 with my semiannual pivot at $1702.5, and quarterly risky levels at $1,844.90 and $1,881.40.

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