Friday, June 5, 2009

"Better Than Expected" Jobs News Already Priced In?

One of the most notable things about the market this week was the persistence of the buyers. Every single minor pullback was bought and there was no easy way to add long exposure unless you were willing to pay up. Traders were very aggressive in small-cap biotechnology and a number of China names, but there was good momentum in many other groups with mixed fundamentals like auto parts.

Oil and commodity stocks dished out some major volatility this week. After collapsing on Wednesday, they bounced back big on Thursday and then fell again today. The dollar strengthened and that took gold down sharply.

The most worrisome development is the continued weakness of bonds. Interest rates are going up and it is hard to imagine that there won't be some major negative fallout should that continue. So far the technical action of the market doesn't indicate any major concern, but when we do see a correction you can bet it will be blamed on stagflation concerns.

It is very easy to find fundamental reasons for why this market should not continue to chug steadily higher, but fighting the favorable price action is a very tough way to make money. There are obviously a lot of folks who would like to buy stocks lower but they aren't getting a chance. They are unlikely to go away quickly and should continue to provide support. The bulls may need a rest but they are still firmly in control.

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