The market had the excuse it needed today if it wanted to really just give up and start a strong correction. Terrible news from the jobs report showing one hundred thousand less jobs created than what was expected and hoped for from the report. Again, we saw Wednesday’s ADP report give bad insight as to what was coming on the big day. So now the market was set to fall because, although the unemployment rate dropped to 9.0, which was far better than expected, it came about due to a huge mass of people giving up hope in finding a job and just walking away for now. The rate fell for all the wrong reasons. Market reaction? Flat opening. Should have been down well over one hundred Dow points. Actually, more than that, but the market said no. I am never going to be the one to say the market has it wrong. That’s not my job. My job is to play what I see, and for now, what I see is a market that refuses to fall no matter what news seems to hit.
We had the bad report today, and we have had unrest in Egypt in a very scary way. The people there are fighting for democracy. That’s fine. But the unrest, the fighting in the streets, is simply scary stuff. That hit the market a drop initially, but has since been ignored. The market is telling us that in time democracy will win out. Ultimately, that’s a good thing for their people, so try to ignore the carnage now, and look forward to the bigger picture and happy ending.
The excuses are everywhere, and I am not saying this can continue without a strong pullback. But you have to play the message in the moment, and that message is loud and clear and it’s saying that some exposure is appropriate. It’s not saying go in one hundred percent, but it is saying to keep away from shorts for the moment and focus on playing some longs. The correction will have to hit at some point, but never fight the trend in place.
The market spent most of the day trying to pull back, but when a strong trend is in place, and when new money wants in you see buyers, step up. There was weakness in the financials and the commodity world, two recent leaders, yet, the market found a way to get the money rotated around as usual and keep things from falling very much. Throughout the entire bull market we have not seen money leave, but instead, rotate. A classic sign of a bull market.
When a bull market is ending you’ll see distribution volume. That money will not go back in to other sectors, but in fact, go in to money market funds where it is safe for the time being. Money is not being put in those money market funds right now. Today we saw that once again. No way of knowing when that time will come big picture, but for now, the money is there to keep this market hanging tough, even when we get our pullback. There will be enough money rotating around to keep the market from getting hit too hard.
Markets are all about earnings and the economic forecast. On the earnings front we are seeing some blow ups that are really crushing some stocks. However, there are loads of stocks being rewarded big time on solid reports. This is a great sign for the markets bullish stance. Company’s are reporting big numbers and raising guidance, which is all the big money focuses on. No one really cares about what you’ve done. They want to know what’s down the road. On that front the news is quite good. Stocks, like JDS Uniphase Corporation (JDSU) exploded higher today, and has now doubled over the past two months. The fact that it had already been up 5.05 didn’t stop it from exploding higher today on some strong numbers.
Even high P/E stocks, such as Acme Packet, Inc. (APKT), have been rewarded. P/E’s over 100? No worries. I don’t get it, but that’s what’s happening for now. When earnings are strong you are likely to see the bull market continue for quite some time. When looking at the economy, that’s not so good from a jobs creation perspective, but printing press Ben is making sure there’s enough stimulation to keep it humming along well enough to allow for these good earnings reports. Don’t fight the printing press.
The Nasdaq closed four points over the top of the wedge today. 2765 is the top, and it closed at 2769. Not a huge blast breakout, but it did close above the top of the wedge. That’s something the for which the bears have to be aware. If this starts to extend a little further it’ll cause the bears to start covering once again. 2716 is the gap that is supporting pullback’s for now.
The S&P 500 and Dow do not have the best looking set of daily oscillators, but the charts are showing good price action. In addition, as bad as those charts look, you see a very nice chart on the small and mid caps. Mixed, and with the bull in place, you give the benefit of the doubt to the better looking charts for now. Staying long for that reason. Nothing dramatic but long.
Have a fun weekend. Be kind to someone for no good reason other than to do it. Also, play with a child if you get the chance. You’ll forget about all your problems.
Peace,
Jack
