No matter how one wants to decipher today’s market surge, it all comes back to something as simple as getting in front of last week’s NFP#. Of course, this only worked if you are optimistic on the economy and used the ‘initial claims’ to foreshadow another robust NFP# and thus getting in front of it. Nothing that occurred today post FOMC/ JPM would’ve happened unless sentiment was just right. Probably, it’s very hard for many to imagine that SP was ~55 handles lower only 5 trading days ago/ pre NFP#!..”Still, if you believe in the recovery, it's hard not get in on a ~35SP move off highs in front of the NFP# sooner than later”. (SP at 1340 last Tuesday)
If one believes today’s ‘close to expectations’ FOMC (a tad hawkish, yet slightly more upbeat on economy) and J.Dimon shooting off an early bird dividend special ahead of the scheduled stress tests results,(15/03) would’ve caused SP to close at 1395 without last week’s ‘better than expected’ NFP, is simply dreaming. An improved labor market does wonders!.
A solid Retail # helped the day start on the right foot. The BKX (>4 %) was having a solid day and it was fueled further by JPM. Financials already had a good dose of things going for it as it benefits from the brighter labour market/ economy. Add a better Europe, which equals a better fixed income environment and those financials connected to the capital markets benefit as well. FOMC forced to release ST results did so AH’s and overall it seems favorable to the sector as well. The dividends/buybacks that followed JPM were the expectation following results, it’s just the timing and JPM front running the announcement that got the market excited.
Noted into FOMC ..”Even if Bernanke become more ‘ hawkish’ and commodities feel the wrath, it would be interesting to see if single stocks/groups continue to decouple and hold up”. Precious Metals fell as the commodity got smashed, yet equities held onto the gains right after FOMC , which was just the action we were hoping for above. The FOMC leaned slightly ‘hawkishly’ as far as prospects of further QE launches.
Ahead of last Friday’s open,….. “All the 'noise' this week has either created a selling opportunity back near highs now (if ‘damage’ has been done) or we’ve seen the necessary 2-3% ‘healthy’ pullback before an eventual move to SP 1400. In all, SP holding 20MA by Friday’s close might go a long way in answering that question.”. SP closed well above the 20MA benchmark at the close of the week, so you can say it answered the question with vigor.
Into the trading week,..” Here the belief is simply there is sufficient doses of both at this point for the market and after last week’s pullback and reversal, many more will likely believe this off the latest jobs#'s. Can the market stand on its own two feet (economic #') without massive QE ahead is the question/ debate for the longer term? …The only headwind to SP1400 is ‘technical’, which includes recent poor price performance of (ie. RUT needed to get back into 812-833 range, closed 817, >833 break leads to SP 1400.”. You can’t get any closer than RUT close of 831 coinciding with SP’s 1395 close.
Wednesday be will interesting to see how market digested the FOMC/ Stress results overnight. A Gold/ TSY sell off continuing will answer the question, so watch these in the morning. A reversal in these 2 would indicate the market got ahead of itself.