Wednesday, June 2, 2010

Stocks Surging in Advance of Jobs, Retail Data

Apparently, market participants are of a mind that upcoming jobs reports, in the form of the May ADP private sector report, Thursday's usual unemployment claims and Friday's BLS non farm payroll report, will outweigh most of the other issues that have been dragging stocks lower recently.

Of course, it could all be a one-day burp in advance of Thursday's retail figures - expected to disappoint - for suckers, or be really nothing at all.

Stocks have been trading in a range, and the only key figure to keep a close eye upon is Dow 11,205.03. That's the most recent closing high, hit back on April 26. If the Dow cannot climb up to and surpass that mark, expect trading to become either range-bound or negative for an extended period. With earnings reports still 5-6 weeks in the future, there needs to be some kind of catalyst, and the gut feeling around here is that the negativity spewing out from the floor of the Gulf of Mexico - in addition to ongoing, overhanging debt fears globally - will be sufficient enough to keep investor optimism constrained.

Today's quick-hit rally, mostly occurring after 2:00 pm, has little meaning in the overall context, especially considering the oversold condition of the market. Another 300-400 points higher on the Dow would not be out of the question over the next two to three weeks, just as a continuation of the downdraft would surprise nobody.

Generally speaking, it's never a good idea to base very much on one day's trading. The remaining days of the week should provide more clarity.

Dow 10,249.54, +225.52 (2.25%)
NASDAQ 2,281.07, +58.74 (2.64%)
S&P 500 1,098.38, +27.67 (2.58%)
NYSE Composite 6,839.54, +178.44 (2.68%)

Advancers climbed all over decliners, 5353-1220, a 9:2 margin, though our tried and true indicator showed that new highs could not overwhelm new lows, which carried the day, 127-105. Though that margin is narrow, the trend of more new lows than new highs indicates that the market is meeting overhead resistance, and that the market is at least fully priced. Volume, low for the session for the fourth day in a row, indicates the lack of conviction, even in spite of today's outsized headline numbers.

NYSE Volume 5,837,430,000
NASDAQ Volume 2,171,016,000

Oil grabbed a negligible bid of 28 cents, gaining to $72.86. Gold sold off by $4.20, finishing in New York at $1,220.60. Silver was lower as well, losing 24 cents, to $18.30.

While today's gains were overall outstanding, they may be nothing more than an overreaction to a paucity of news, much of which has been bad of late. Bulls being what they are, the momentum could last until something comes along to derail it or send prices even higher, mostly a countertrend move inside overall bear market conditions.

There's also some divergence within the various indices. While the Dow and S&P still trade below their 200-day moving averages, the NASDAQ is poised above its 200 day MA. These conditions usually end up favoring the bearish camp in the long run, but the market being as unpredictable an animal as ever walked out of the jungle, anything is possible.

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