My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

No matter what the news, the major indexes only seem to know how to move higher.

Our Trend Tracking Index (TTI) for domestic funds/ETFs moved above its trend line (red) by +6.62% (last week +6.88%) and remains in bullish mode.

The international index has broken above its long-term trend line by +7.56% (last week +6.77%). A new Buy signal was triggered effective 9/7/10. If you decided to participate, be sure to use my recommended sell stop discipline.

For more details, and the latest market commentary, as well as the updated No Load Fund/ETF Tracker StatSheet, please see the above link.

The futures were right, as I mentioned in yesterday’s early morning post, and the markets picked up the momentum from Europe and galloped higher, although they closed well off their highs for the day, as the chart above shows (courtesy of MarketWatch.com).

One of the reasons for the pullback was increased uncertainty caused by problems with home foreclosure proceedings. It appears that finally Attorneys General from all 50 states have joined to examine foreclosure practices.

At issue is not whether a non-paying homeowner should be foreclosed on but whether all state laws were properly followed. Adding more confusion is the fact that most mortgages were sold several times and the questions has come up as to who would now be the legal party with the right to foreclose. At least that is my understanding at this time.

The effect was that the major indexes pulled back as lenders, such as Chase with 115,000 mortgages, will now have to increase reserves for litigation costs, which will not only reduce profits but also could extend over an unknown time frame.

Nevertheless, the indexes ended to the upside with the S&P; 500 now honing in on its 2010 high, which occurred back in April. The big performer, however, was gold with a new intraday high of 1,376.

Again, the happy trio (gold, stocks and bonds) continues its upward path with gold being the asset class that makes the most sense in this environment. The destruction of the dollar, along with global economic uncertainty, were some of the forces pushing the metal to its current levels.

I would not buy gold outright here, because it can be subject to violent corrections, but we own it indirectly via a mutual fund that has broad exposure to it.

Amazingly enough, the stock market is able to locate only good news, or turn bad news in a positive. As a result, the focus remains on recovery hopes, whether they are substantiated or not.

I may be one of the few who always seems to get concerned when markets rally with utter abandon, as it’s just a matter of time when the inevitable downside comes into play.

As anticipated, the Fed’s minutes yesterday showed that the members of the FMOC are concerned about continued high unemployment and whether deflation will swamp the economy.

It was not apparent as to when the Fed would act by injecting more cash into the economy via the purchase of Treasury securities. No specifics as to the amount of money intended to be used were mentioned.

This entire act of Quantitative Easing (QE-2) represents an untried and unproven method based on nothing but theoretical economic models to get the economy moving forward by avoiding a return into recessionary territory at all costs. It’s questionable in my mind whether it will have any positive effect at all, and it remains to be seen what the backlash will be.

Obviously, the stock and bond markets have been enamored by the fact that help is on the way; and in the end they may very well be the only beneficiaries of this effort. In fact, as I am writing this in Germany, it’s 2:20 am PST, and the European markets have reacted favorably to the Fed’s minutes and are up over 1%. The futures indicate a stronger opening in the U.S. markets as well.

While QE-2 may have a short-term positive effect on your portfolio, I question whether it can solve any of the pressing concerns along the lines of high unemployment, a depressed real estate market or any of the other issues that ail us.

This may very well be the last bulled the Fed has in its economic gun; if it fails to get the intended results, there is bound to be a reaction in the stock market, and it won’t be a pleasant one.

Therefore, I maintain my view that it is better to participate in this rally in a conservative way, than to go all out and suffer the consequences when the inevitable directional turn takes place.

Made it over the big water hazard and arrived safely in Hamburg, Germany last night.

With the bond market being closed on Monday, equities meandered aimlessly and closed at or within a few points of the unchanged line.

There simply was no driver in sight to provide momentum in either direction; it almost looked like the calm before the storm. The storm could very well come in form of today’s release of the minutes of the last FOMC meeting, which will contain discussions on some of the Fed’s options.

Bearish news was released by the National Association for Business Economics as this group lowered its economic growth forecast for 2011 to 2.6% from 3.2%, which is still very optimistic in my view. Furthermore, they see unemployment remaining above 9% all of next year with a weak Holiday spending season ahead.

I wonder if Wall Street, with its unrelenting focus on the recovery, even considers the possibility that an economic slowdown has merit and is very likely to show up over the next few months.

With the markets having been on a tear since Labor Day, our Domestic Trend Tracking Index (TTI) has advanced at a very steep angle. The reason for that is that this indicator includes an interest rate sensitive component, which has, due to lower rates, exaggerated the slope.

Let’s take a look at an enlarged portion of the TTI to the left.

Upward momentum caused a break-away gap in the chart (see arrow) recently, which means that the previous week’s high was lower than the next week’s low. As I have written before, these gaps will always be “closed” eventually when prices decline again to a point that represents the beginning of the gap.

The timing of it is the unknown. Take a look at the left side of the chart and notice the exhaustion gaps during the selloff in 2008. They were eventually closed as the prices rose above them in 2009. It works the same in reverse.

Over many years of studying charts, I have found that accelerated up moves, such as we’ve seen recently, will very likely be followed by equally sharp moves to the downside. Just because a gap has occurred, however, does not mean the eventual downside reversal will stop there; it merely serves as a point of reference.

To me, it’s a sure thing that a pullback through at least the gap level is in the cards. When that will happen is anyone’s guess. All you can do is be prepared via your sell stops to deal with it, should a reversal turn out to be more than just a temporary correction in a bullish trend.

As announced in last Friday’s weekly update, I will be travelling to Germany over this weekend and will not have a chance to update the blog. Regular posting will resume this coming Monday at the usual time of around 6 AM PST.