"It is hardly possible to build anything if frustration, bitterness and a mood of helplessness prevail."
-- Lech Walesa
The big question for the market this week is whether it will continue to brush off concerns about a potential rate hike by the Fed in June or July.
Last week the market barely reacted as various Fed members started to set the stage for a potential hike. Even confirmation by Janet Yellen on Friday that a hike might be appropriate was unable to shake the bulls. Bonds weren't quite so sanguine, but equities seemed quite unconcerned.
This week, market players will be looking ahead to the May jobs report which is due out on Friday. A strong report will likely cement the chances of a hike, while weak numbers may push back the timing a bit. Yesterday, St Louis Federal Reserve President James Bullard said that global markets appeared to be "well-prepared" for a rate hike this summer, although the exact timing remains uncertain.
The bears have long been convinced that a hawkish Fed would be the catalyst that finally kills this uptrend. Much to their surprise, there has hardly been a reaction so far. Either the market doesn't believe the Fed is making an accurate prediction of the economy, or it thinks growth is now strong enough to handle some small hikes.
A third possibility is that there are structural and technical reasons for this market to hold up. Market players have repeatedly learned that this market simply seems to take bad news in stride. When we do dip on something negative, it has routinely been a buying opportunity.
What is interesting now is that the S&P 500 is on the verge of taking out the highs we hit in April and also back in November last year. Often, obvious technical levels like that serve as a magnet, but once the breakout takes place the momentum can fizzle out quite quickly.
A very likely scenario for this market is to break above the 2112-2116 level of the S&P 500 and then quickly reverse before finding support once again. The market loves to trigger buy stops at obvious resistance levels, but the algorithms are often programmed to trap the bulls and reverse at that point.
In addition to the jobs news this week, we also have a meeting of OPEC and the European Central Bank on Thursday. Both those will be potential catalysts going into the jobs news. We also have some economic reports, such as consumer confidence and Chicago PMI this morning.
The anticipatory bears are still hoping that a hawkish Fed is going to spook this market, but it just isn't happening. The mood is positive, the price action good and technical conditions favorable. There is little choice but to maintain a bullish bias if you want to make some money.
Recent Stock of the Week Celator Pharmaceuticals (CPXX) received a big takeover bid this weekend and that should help the biotechnology group.
