The market waited with great anxiety over what those job numbers would bring on Friday. The real anxiety was caused by the market being so overbought and with high expectations on the numbers being strong, the market seemed set-up to finally fall some and get that long awaited pullback going. The number did disappoint for sure, coming in below expectation and well below the whisper number, whatever that silly nonsense is.
The markets reaction? HIGHER!! Who cares about bad numbers.
The number was weak, sure, but the bottom line was that at least there was some growth and in a bull market, that’s good enough for your average buyer. Possessed might be an appropriate word for this market yet if you look at it, it feels better than it is. We are grinding and not blasting. It has been this way for a while but stocks keep rocking higher if you know where to look. Commodity stocks are on fire. Lots of other areas doing very nicely as well. It is a stock specific market although you’d be hard pressed to find an area doing badly. However, if you do your homework, there are areas far out performing. Bottom line is, the market marches on in the face of overbought and in the face of disappointing job numbers. Impressive!!
Today was very interesting from a few perspectives. One, we saw Apple (AAPL) blast up pre-market on their new product sales yet those gains went away before the market opened for trading. Classic sell the news? After all, AAPL has gone straight north and one would expect it to sell. Somehow, after selling back early, it found new buyers yet again. This is very unusual after such a strong move higher pre-product release, no matter how good those numbers were on sales.
In addition, after gapping up, the market fell back and it looked like a gap-up failure was in place. Finally, the end of the run up. Finally, a pullback was here. Also, not to be as the market shot up again, especially the Nasdaq. When beta is leading, its positive for equities longer-term. Risk is key and there was risk buying today for sure. So we saw AAPL and the market pull back in classic sell the news fashion only to watch them come up once again, allowing the markets to finish in the green and near the highs on solid internals. Strong action across the board in what has become common place action for this bull market.
We were at 29.7% more bulls than bears coming in to this week and it’s probably a strong bet that those numbers are now going to be over 30%. We know that once it?s over 30% the red flag gets waived, and over 35% the market is in trouble. it took 37.5% to nail this market lower last go around and who knows what’ll it take this time. We need to start paying very close attention to the numbers now as we could be heading for extreme danger sooner than we’d all like. When the optimism is too strong it’ll be time to head to cash and I’ll know those numbers on Wednesday morning.
The S&P 500 continues to put distance between current price and 1151 support. It’s now about 3 full percent above thus any normal pullback should find strong support there. The way stock bases are setting up and breaking out, it may put more distance away from it first before pulling back. These stocks are breaking out, putting in handles of varying lengths and breaking out all over again. The wash, rinse, repeat cycle continues unabated. When it ends is anyone’s guess but you must play the trend in place until it is no more, and that includes buying weakness when it actually shows itself. These bull-flag handles will have to start breaking down before we can even think about getting bearish for any period of time. For now we stay with the trend in place as always. Never fight it. We will get caught in a play or two when this thing finally pulls back hard but let’s just roll with things for now.
Peace,
Jack
