The market did a surprisingly good job of shrugging off weak action in Europe. We gapped down to start the day on the usual negative headlines, but chugged steadily upward the rest of the day and even gained traction after Europe closed in the red across the board.
Have we finally stopped moving in lockstep with each new development in Europe? That would be nice, but those problems are not going to go away quickly or easily, and they are severe enough to be a continuing issue. It's progress when we can have a day without the European pall, but it's premature to believe that we will become completely uncoupled.
The strong ADP (ADP) employment report certainly helped the mood, but it is going to be quickly tested by the government report Friday morning. I suspect the bears stood aside this afternoon rather than risk being squeezed on that news in the morning.
As I discussed in my previous post, it sure looked like the computers were active today. We had one of those straight-up moves with no pullbacks after we exceeded the opening highs, and that obviously had bulls and bears scurrying to reposition.
I've been more cautious the last couple of days, and the action didn't convince me that I should load up on longs. The biggest obstacle continues to be the lack of good charts with strong momentum. The stuff that is working is much more random and mixed. The lack of themes is a real problem for aggressive trades.
After the close, we had another warning in the technology sector and one in the retail group. This is by far the most warnings in quite some, time but we have yet to see much of it reflected in the overall market. Good earnings have been the best thing that market has had going for it since the lows in 2009, and it is going to be interesting to see how we deal with it if we don't see the same level of beats as the past quarter.
The jobs report will set the tone in the morning, and I'll be looking for the bears to try to fade it. The risk of a further squeeze will be higher, but market players are keeping stops tight and will not let profits slip too much before heading to the sidelines.
Have a good evening. I'll see you tomorrow.