Welcome to the weekend, everybody. And, welcome to Janus, Bill Gross. Talk about the end of an era! On the off chance you haven't heard, PIMCO founder and CIO Bill Gross has left the asset management firm for competitor Janus Funds. Considering Bill Gross and PIMCO were pretty much synonymous, this is quite a shake-up with the financial world. It doesn't really change anything about the market's future. It's just a jaw-dropping move. Crazy. Anyway, about the market... Yes, stocks were up today. They even popped back above the key floors they broke under on Thursday. It's too soon to even think about Friday's gain being the beginning of bigger recovery though. The bears still have the momentum, and the bulls still have some big hurdles to clear before we can afford to entertain the idea of an early October rally. Let's start with a look at the chart of the S&P 500. The close at 1982.85 was back above the floor at 1980, back above the 50-day moving average line (purple) at 1976.76, and back above the lower 20-day Bollinger band. It's a bullish step to be sure, but it doesn't mean a thing yet. We'd need about three more days just like it to assume stocks have a prayer of coming out of this funk without going through a much-needed correction first. From here, we basically wait. The 20-day moving average lines and/or the 2000 level is going to be our cue to open our minds to the possibility of a bullish move here. Conversely, a move back below 1980 will all but confirm our bearish suspicions. A break under the 100-day moving average line (gray) in conjunction with the VIX breaking above its ceiling at 17.20 would fully confirm our bearish worries. It's pretty much the same we were explaining yesterday, so we're not going to dwell on it today. And yes, we're still operating under the assumption any pullback is only going to be a short-term event primarily to burn off some of the market's froth. The trailing P/E is still at a hefty 17.5, and analysts expect Q3's earnings for the S&P 500 to grow 11.8% (year over year). We're well aware Q2's GDP growth was a strong 4.6%, but that was a whole quarter ago. Were things really so red hot over the past three months that U.S. companies were able to boost their bottom lines by 11.8% for the third quarter? For that matter, are things truly so great heading into fourth quarter that the S&P 500 is going to be able to pump up its year-over-year bottom line by 14.6% over the coming three months? That's one tall order. We have our doubts, and it looks like the market is starting to have some doubts too. Again, it won't take a full-blown bear market to make the needed valuation correction. Just a decent dip. We'll take a closer look at this bigger-picture situation early in the coming week. On other fronts, it looks like I was wrong about the U.S. dollar's rally getting reeled and the U.S. Dollar Index being capped at 84.35. With the break past 84.35, now the path is cleared for the index to move to the next ceiling at 88.23. That's where it peaked in 2009 and then again in 2010. The reason I'm bringing it up today is to make sure you're aware that this is going to put bearish pressure on gold, bullish pressure on bonds, and probably put bearish pressure on stocks (despite today's advance for the market). Of course, I think the price of gold has already factored in as much dollar strength as it's going to be able to. There's lots of room for bonds to keep rising though. If for some reason the dollar pushes above 88.23 - and that's a huge "if" - it could be serious trouble in Q4 for large U.S. companies that depend on overseas sales. Let's cross that bridge when we come to it though. I really don't think the dollar's going to have what it takes to move much higher than it already has. Portfolio Update - Pulling the Plug on Penneys We know it was only yesterday we were willing to stick with the JC Penney (JCP) trade, as it had yet to break under a major line in the sand at $10.03. Thing can and do change quickly in the game, however, and all it took for us to change our mind about JCP is Friday's break below $10.03. Go ahead and dump it, if you owned it because we liked it. I still believe in my heart of hearts JC Penney is going to be revived, and I'm equally confidence the stock will reward investors who are willing to hold it for the long haul. As for us and our readers though, we're willing to get out now and wait for a better re-entry point into what's intended to be a long-term trade. Timing really is everything. That leaves us with one open position.... ePlus (PLUS). We're on the hunt for more, however, although at this point we're waiting for the market to find firmer footing. We're sure that's in the near-term cards too, but at much lower levels than where the indices are trading now. I suspect early to mid-October will give us the trade-worthy bottom which will then be followed by a rising tide that lifts all boats. We are going to go ahead and add Dorman Products (DORM) to our watchlist - but not our portfolio - though. Yes, this is one of the small cap discretionary stocks we mentioned a couple of days ago when we took a deeper look at the S&P 600 Consumer Discretionary index's earnings and valuation. We also mentioned G-3 Apparel (GIII), but Dorman is the best of the best in this group we've found so far. Real quickly, DORM is an aftermarket auto parts manufacturer and supplier. It's been a great business to be in for several years now, and Dorman Products has capitalized on that undertow with amazing consistency and proficiency. The company's in its sixth straight year of earnings growth, and next year is expected to be its seventh. The stock, however, has been nothing but painful to own since March, sliding from a high of $60 then to the current price of $41. What happened? To be fair, as strong as the company's earnings growth was, the stock got well ahead of its income. The market finally figured it out early in the year, and corrected the mistake. Well, investors corrected the mistake, but they overdid it. What I'm waiting on is proof that the bulls are going to correct the mistake of driving the stock too low. I thought we might have seen "the" bottom a couple of weeks ago when DORM accelerated to a low of $37.22 (on a volume spike) and then bounced right back. The effort fizzled though. It's not clear when that bounce might materialize, but I'm willing to bet it will be soon, and in conjunction with a marketwide recovery. Can't wait for your next trade? I hear you, and I have a solution for you. Remember a couple of days ago when we mentioned the Elite Opportunity service had recommended Merrimack Pharmaceuticals (MACK) last week and then enjoyed a 12% intraday pop on Wednesday. Well, as it turns out, anybody who didn't get out early on Wednesday got a second chance between yesterday and today. MACK was poised to end the session above $8.00 today, close to Wednesday's peak around $8.41. Congrats to all the EO subscribers that pulled the trigger and then got out Wednesday or today. As it turns out, however, lightning does strike twice. It struck for Elite Opportunity subscribers today with Micron Technology (MU), which John Monroe recommended to EO members on the 19th when he also suggested getting into MACK. Micron shares jumped 7% on Friday, and as John explained in today's newsletter, this could be the foundation for a much bigger breakout. It's probably too late to jump into MU at its current levels, but it's never too late get the next winning trade John Monroe digs up. Just sign up for the service. There are several subscription timeframes, but I suggest you start with the free two-week trial just to see what it's all about. If you like it, just stick with it. In fact, let's make that your only homework for the weekend... register for the free test-drive to the EO service. Here's the deal. Or, cut and paste this link: https://www.smallcapnetwork.com/?vmpd_ckstr[click_track]=Newsletter&vmpd_ckstr_redirect=/pages/SCNEO/v1/ That's all for today, folks.