Sunday, April 08, 2007

Strong Jobs' Report

Market Action:
Even though it seems a long time ago, the stock market traded on Thursday but not much happened.  All the major indexes were up on the day and in fact were up every day last week.  The volume was on the low side for the last two trading days last week but the prices were up.    

The condition is one of bullishness, again, and the market seems willing to grant the bulls one more rally.  The question is, “How far can this rally go?”  Well, on Friday the jobs’ report was higher than expectations with 180K jobs added in March compared with the 135K expected; and, the February jobs’ number was revised up from 97K to 113K.  (The unemployment rate actually fell to 4.4%, please.)

The jobs’ report inspired some interesting trading; this was not with the normal market open, by the way.  Normal thinking would put the focus squarely on the interest rate situation, meaning, with a stronger jobs report, the market would figure the Fed could not ease as soon as was hoped.  We said “normally” that would be the case.  Now, on Friday, the market did react partly the way it normally would.  The dollar was stronger due to the threat of no future interest rate cuts and the bond market fell due to a “stronger” economy.  The stock market futures were stronger after the news, reacting in part to the “stronger” economy versus the possible lack of interest rate cuts.

We expect that the market will trade up in early Monday trading based on these Friday actions and the overnight stock futures are indicating that to be true as well.  The Japanese market is strong tonight and that probably has something to do with last week’s jobs’ report as well.

As we head into a new week, we are anticipating the market to feel that it has overcome the sub-prime mortgage fiasco.  The stock market sometimes rally when it’s not supposed to.  We have said that the corrective wave we are now in will probably retrace a great deal of the first waves decline and that is definitely true as we head into Monday’s trading.  

There are other possibilities, one of which is the short term bullish outcome of this rally.  We could see the Dow make a new high in the next few days which would not make us very happy being as short as we are but the possibility exists.  We would hope that high, if it was coming, would be met with no other major index following suit confirming the high was not a real high, just a headline high.  Monday’s trading will give us major clues as to what is going on in the short term.    

This Week’s Upcoming News (Not Much):
Tuesday—AA (Alcoa) will kick off the quarterly earnings parade
Friday (the 13th)—March PPI report

Dow Industrials:  12,560.20  +30.15
VIX: 13.23
HUI:  354.15
QQQQ:  43.56
QQQRS: 1.33 bid
QQQRT:  1.85 bid
RYVNX:   16.43
RYAIX:  21.22
RYCWX:  35.37
TLT:  87.75
BEGBX:  13.90

No comments: