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Jack's Wrap - Fed On Deck... Jobs In Line… Market Strength Continues...


Friday March 9th 2012
Fed On Deck... Jobs In Line… Market Strength Continues...
by Jack Steiman www.SwingTradeOnline.com

It seems over and over there's build up to a report that's going to make a huge difference in what takes place in the stock market. It could be the ISM Manufacturing Report. After that, we hear about the NY State index, or the Chicago PMI. Then we get the news on the big jobs report, and in between, week after week, on Thursday, we get the jobless claims report. We get durable goods, etc. Some of the reports are far from great. Most are decent-to-better than expected. The result seems to be that the market wants to hold onto its gains and inch its way higher. Most of the reports are quite important, and much is expected, but in the end, not much seems to happen. Today, there was the expectation that 210K jobs were created in February. The actual number came in at 227K jobs created. That was slightly better than expected. Nothing earth shattering, but a little bit ahead of expectations. The result is yet another reason for this market to maintain some type of a bid day after day, although we do get some down days, one day down as much as 200 points this week alone.

There just doesn't seem to be any real catalyst to get the bears more aggressive. They are defending resistance for now, but seem unable to put together any sustainable down side action as the news just isn't bad enough at this point to take away the primary trend currently in place, which we all know by now is to the up side. It is clear this market will need something special from a negative perspective to get any real sustained selling that could ultimately turn the tide. Unless that happens, we will likely see only the normal type of selling associated with a market that was overbought for too long a period of time. It could sell 3-5% at any time, but it's not likely to do more than that unless the bears get the type of news that currently does not exist. We all know it can come, and you have to be on guard for it, but at this moment in time, that news isn't out there. In the end, it was another week where the bulls held their ground successfully.

So what is it that could derail this market from its current strong up trend?

There are a few things hovering out there that could bring this market down harder than most think possible in this moment. Greece, and really all of the Eurozone, except Germany, is struggling financially. Greece and Italy are the two worst situations that could implode at any time. There was an auction yesterday that once again saved Greece from what seems like imminent default. I don't think a Greece default would be devastating, but I do think it would knock this market down harder than people think possible. Italy would hurt more, and so on. Money is being thrown at these countries in an effort to save them, but you have to wonder just how long the free cash party can last and what the longer-term ramifications will be because of it. Just how much more debt can these countries handle? It would seem they're already up to the eyeballs with it, so it makes me think that someday it all ends badly, but who knows. The other factor that could derail the markets is simply deterioration in the economic story unfolding. Watching those key reports week after week to make sure they're holding up. If they start to decline, the market could eventually take a huge hit. There’s always something out there to keep you on top of things. For now, we are not dealing with these issues, but some day we could.

Here we go again early on next week. We hear from the fed on his interpretation of the economy and what he'll be doing with interest rates. Folks want to know if he's changing his mind at all about leaving interest rates near zero for two more years. Maybe the economy is improving enough that he can hint about easing up on his promise to keep rates this low for so long. Folks would like to hear he's thinking about raising rates a bit as it would show, to the fed at least, that things are indeed truly improving rather than hearing these decent economic reports, but not seeing the fed respond to them in kind. If the economy is really getting better folks ask, why aren't interest rates on the rise, even if it's ever so slowly? I'd like to know the answer to that myself to be honest. We see report after report coming in quite decently, yet we hear the fed promising near zero interest rates through the end of 2014. It seems like a strange disconnect to me, and probably to everyone else as well. His talk on, I believe it's Tuesday, will be more than a little interesting. Gold and silver bugs will want to hear the opposite. They want fear. They want hints of QE3. There’s much to be learned about early next week.

Many stocks are in bull markets, but some are also in bear markets. Stocks like Cliffs Natural Resources (CLF), Peabody Energy (BTU), Amazon.com Inc. (AMZN) along with Walter Energy, Inc. (WLT), are in bear markets, although now getting strong bounces off oversold conditions. Hopefully, the bounces being the beginning of something more positive over time for these stocks. Time will tell. Lots of stocks, naturally, are in bull markets and powerful ones at that. From many different sectors. It's good to see powerful stocks everywhere. Priceline.com Incorporated (PCLN), Apple Inc. (AAPL), Caterpillar Inc. (CAT), Flowserve Corp (FLS), Fossil, Inc. (FOSL), W.W. Grainger, Inc. (GWW), and hundreds of others are in great patterns and bases that continue higher. Like any market, it's mixed. Be careful where you put your dollars. In the meantime, we know 1370 must clear with force to give the market a clean shot at S&P 500 1400. 1325 down to 1315 is powerful, massive support the bears will struggle to get through. The market may need several weeks or more to handle out to continue to unwind things, but for now, the battle lines are drawn between a clean blow through 1370 resistance and 1315 support. A longer-term handle would be good for the market. Just buy good bases and hold through the whipsaw.

Peace,

Jack


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