I'LL BE IN EUROPE NEXT WEEK -- A REVIEW OF OCTOBER MESSAGES SUMMARIZES WHAT I'LL BE TALKING ABOUT THERE -- THE OUTLOOK FOR THE REST OF THE YEAR LOOKS GOOD

MURPHY MARKET MESSAGES INDEX... I'll be in Europe next week to give a speech at the International Federation of Technical Analysts Conference in Madrid, Spain and make a couple of other speaking stops along the way. My main topic will be the same market trends and sector rotations that I've been writing about over the last few weeks. In fact, my entire PowerPoint presentation is taken from recent Market Messages. Since I've been studying them over the last couple of days, I thought I'd briefly review some of the headlines of the past month and try to pull things together as October ends and we head into November. If you don't already use it, I recommend that you keep track of the Murphy Market Messages Index. This is especially true for newer members who might not be familiar with what I've written in the past. Or for those older members who have forgotten. The archived messages are available back to the start of 2003. They're all there -- the good ones and the bad ones. We don't edit or delete any (although I'd like to). You can get to them through the John Murphy tab. At the top of the page, you'll see the three most recent messages. By clicking on "More Archived Messages" you'll see all the headlines starting with the most recent. You can see any of the original messages (along with their charts) by clicking on a date. To get there now, click on index

HEADLINES SPEAK FOR THEMSELVES... Whenever I post a new message, I try to include as much of the subject matter in the headline as possible. I do that for two reasons. One is so that anyone scanning the headlines won't miss anything included in a message. The other has to do with the "search" function which can be found in the upper right of the index page. When you type in a name of a stock or an index or a commodity in the search box, it will list the headlines that mention that name. It's an easy way to scan back for past messages on particular subjects.

OIL USUALLY DROPS IN OCTOBER... Some of the messages have more shelf life than others. Some are very short-term oriented. Others have more lasting importance. One headline that I spotted this week was from September 23 and read: OIL MAY BE CLOSE TO AN OCTOBER TOP (see message). In that article, I pointed out that oil had peaked in nine of the last twelve Octobers. I also suggested that an October peak in oil could lead to an October stock market bottom, which is another pretty consistent seasonal pattern. As October ends, the recent drop in oil greatly increases the odds for the traditional fourth quarter stock rally. I try to combine traditional technical analysis with intermarket trends and sector rotations. I also pay attention to seasonal patterns. October bottoms usually give way to the strongest three months of the year, which last from November through January. The best six months of the year also start in November and last through April. Hence the saying: " Sell in May and go away". But be sure to come back in November. A scan of the recent headlines shows that I believe the fourth quarter rally has begun -- and why.

SOME RECENT HEADLINES... --Lower Oil and Higher Airlines are Good for the Market (October 28) --Plunge in Oil Helps Launch Yearend Rally (October 27) --Falling Oil and Rising Techs are Good for Market (October 27) --The Dow is in Trendline Support and is Deeply Oversold (October 26) --Buying Large-Cap Value (October 26) --Smaller Stocks Hold Up OK (October 25) --XAU/Gold Ratio Suggests Higher Prices for Both (October 25) --Dow Theory Revisited - Does the Current Non-Confirmation Mean Anything? (October 22) --Rotation Into Techs Picks up Steam -- Led by Internet and Software (October 21) --Watching the OSX and SOX - Money May Start Rotating From An Overbought Energy Sector into an Oversold Chip Group (October 11) (see message). In that message, Chart 3 shows that the SOX/OSX ratio, which had been falling all year, was starting to bounce from chart support at its early 2003 low. That carried two important messages. One was the need to rotate out of energy into chips. The other was that a rising SOX/OSX ratio is good for the stock market. A stronger tech group -- combined with weaker oil -- is a necessary ingredient in a market rally. I'll be showing that chart in Europe.

WHY NASDAQ LEADERSHIP IS SO IMPORTANT ... I don't want to give the impression all my messages have been right. (See October 1 message). That headlines starts off by saying: "Fourth Quarter Rally Appears to have Begun". That was about three weeks too early. Another chart that I'm taking to Europe is Chart 2 from that message entitled "Why Nasdaq Leadership Is So Important". That chart shows that the market does better when the Nasdaq/S&P 500 ratio is rising, which it had been doing since August. Here again, there were two meanings. One was to put some money into technology. The other was that Nasdaq leadership is good for the market. That's been a consistent theme in many of my messages.

HERE'S WHAT I THINK IT ALL MEANS ... The year 2004 has been corrective for the stock market and has been dominated by rising oil prices. Technology has been the year's weakest sector. It now looks like those roles are reversing -- at least through yearend. That's good. At the same time, upside leadership by small and midsize stocks is a positive sign. In the large cap world, value is still doing better than growth (possibly in a search for higher dividends). Consumer stocks like retailers are starting to show upside leadership, which may be related to weaker oil prices. An upside turnaround in airlines is another positive. Beaten down groups like insurance and healthcare are rebounding from oversold conditions. Brokerage stocks have turned up, which is another good sign. The Nasdaq has climbed over its 200-day average. The Dow, which has been the weakest of the averages, is oversold and starting to rally. I believe the fourth quarter rally has begun and should last at least into January. That fits into the pattern for the market to rally after a presidential election -- no matter who wins. I'm not that optimistic about next year. But I'll worry about that after January. I still like gold and gold stocks even though both are somewhat overbought as gold tests its yearly high. I remain bearish on the dollar at least through the rest of the year.

BOSTON FINALLY WINS ... Now that the Boston Red Sox have won a world series for the first time in 86 years, the only other suspense is the presidential election. Hopefully, we'll know who the next president will be by the time I return on November 8. Boston seems to be on a roll this year -- at least in sports. I wonder if that means anything in politics. Other writers will be filling in for me next week in my absence. Don't forget to turn your clocks back tomorrow (Saturday) evening. And don't forget to vote.