After a brief stumble in the opening minutes, the market action turned upbeat and unworried. The buyers wanted in, and there was no hint at all in the action that we had just come off of another lousy jobs report.
We just happen to be in one of those perverse periods when bad news is good news because it means that the Fed is likely to continue to manipulate the market higher. Poor jobs news probably also helps bolster the chances of a Republican victory in November, and that would give the market the political gridlock it tends to prefer.
This market action really demands that you set aside logic and common sense and embrace the idea that you just can't fight the Fed in the short term, no matter how wrong its policies appear to be. QE 2 is practically a done deal at this point.
The stocks that are most likely to benefit from a weaker dollar and QE 2 are oils, agriculture and commodity-related names, and those are what lead the market today. Breadth was solid at close at 3 to 1 positive and volume picked up a bit to give us an accumulation day. Financials, particularly the regional banks, were the weak spot today, but most every other sector was up.
Technically, today was a good follow-through to Tuesday's S&P 500 breakout over 1150. We had the highest close since early May, and there isn't much overhead resistance all the way up to the highs of the year we hit in April.
It certainly is understandable why the bears would be feeling very frustrated by this market. It is being manipulated upward by the Fed, and whatever is happening in the real economy just doesn't matter very much. There are a lot of folks holding their noses and buying, and that is keeping the momentum going. At some point, the Fed games will come to an end and the market will pay a price for what it is enjoying now, but today isn't the day, and it's possible that the day won't come for a while.
Earnings season picks up next week, so we'll have some relief from the macro-economic focus. Expectations have been rising along with the market, so the potential for surprise is high.