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BOTTOM LINE: Overall, last week's market performance was slightly negative considering another spike in unleaded gas futures and the potential catastrophic damage Hurricane Rita may have wrought. The advance/decline line fell, almost every sector declined and volume was slightly above average on the week. Measures of investor anxiety were mostly higher. The AAII % Bulls fell for the week and is now at below-average levels. In my opinion, while measures of investor fear are somewhat elevated from an intermediate-term standpoint, they are still registering too much complacency in the short-term for a sustainable rally to occur. One more shakeout is likely in October related to earnings worries which should set the stage for a strong year-end rally. The average 30-year mortgage rate rose to 5.80%, but is still only 59 basis points above all-time lows set in June 2003 and down from 2005 highs of 6.04% set in April. The benchmark 10-year T-note yield fell 3 basis points on the week as traders sought a safe haven from Rita and began to anticipate slower economic growth. The US dollar rose on increasing expectations for further Fed rate hikes and economic stagnation in Europe. Gold fell slightly on the week as traders worried less about inflation and more about slowing economic growth. Finally, most commodity prices rose in anticipation of further disruptions from another hurricane. While crude oil rose slightly on the week, it is still down around 12% from highs seen after Katrina. I continue to believe global oil demand destruction, which began a number of months ago, has accelerated meaningfully over the last few weeks and will send crude prices substantially lower over the intermediate-term.
*5-day % Change
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