As a rule, men worry more about what they can't see than about what they can. --Julius Caesar
The market continues to do a remarkable job of shrugging off negative economic news. Some strong earnings reports are helping the bulls, but there is a persistent bid under this market that is preventing any downside move from gaining traction.
A big part of the support is a function of a high level of skepticism. Market players aren't particularly bullish, but they see the market holding up so they slowly add long exposure so they won't be left out should the market resume the uptrend it enjoyed in the first quarter.
The technical picture is slowly improving as we chop around and build a base of support. We are back above some key levels and the bears can't seem to generate any real downside momentum.
The big issue is whether economic news will provide an excuse for selling. The most likely event is the monthly jobs report Friday. Market players seem somewhat sanguine about the poor ADP report, which isn't a positive as it keeps expectations high.
The most positive thing about the market is the pockets of momentum. We are seeing the hot money chasing some recent momentum favorites such as Lululemon (LULU), Michael Kors (KORS) and TripAdvisor (TRIP) once again.
The second half of earnings season has been quite positive after Apple (AAPL) turned the tide. Ironically, AAPL itself has continued to trade quite poorly, but the good report was a turning point for the market. You have to wonder how much longer the market can shrug off the action in AAPL, but so far it doesn't seem to matter too much.
There are many good reasons not to be overly optimistic about the big picture. The recent economic reports have been below expectations and the situation in Europe remains rocky. But one lesson we should have learned about this market over the last few years is that it has the capacity to run up strong, even when the economic picture seems quite negative. In fact, we often seem to run up even more when everyone frets over the negatives.
A big reason for the market's strength, when the economic picture looks weak, is the power of quantitative easing. If we don't have that driver, you have to wonder how this market is going to act. So far, hints that the Fed is on hold as far as more QE goes hasn't had much of an impact. The market seems to feel comfortable that the Fed will crank up the printing press quickly if we falter, but there certainly is some question about that.
We'll see what happens on weekly claims data, but right now the market is rewarding stock picking and seems to be shrugging off any real worry about the economy or Europe. As long as that support holds, we have to be leaning to the long side.
Europe is up nicely and we have some minor positive action this morning but that may shift on the unemployment news.
More from James "Rev Shark" DePorre: