"I predict future happiness for Americans, if they can prevent the government from wasting the labors of the people under the pretense of taking care of them."
The indices are set to follow through to the upside this morning, but the June jobs report will be hitting at 8.30 a.m. ET and will have some impact on the mood.
The main explanation for the strong action on Thursday was better-than-expected payroll data. The numbers weren't particularly surprising but they were solid and it was a good excuse for the buy programs to go to work and trap the overly anticipatory bears.
The key to navigating this market for most of the year is to understand that momentum has not lasted long. Although the indices are at new all-time highs there has been a mishmash of action under the surface, with just 56% of all stocks trading over their 200-day simple moving averages.
The good news is that the action broadened out yesterday and the small-caps exhibited relative strength. The big-cap FANG names lagged a bit, but it was a good sign that the market could shift to some new leaders.
The thing many folks don't realize is that there already has been a sizable correction in many stocks, but it has been hidden by the indices. Instead, we have the media constantly trumpeting the fact that the indices are hitting highs with no real explanation of how narrow the market really is.
One of the sideshows this morning is the withdraw from the Paris climate agreement. The market is shrugging off the news probably because it never really expected the deal to have any actually impact. The critics of the deal claim that it simply shifted costs and responsibility to the U.S. while allowing the real polluters. primarily China, to make no real changes.
While the politics are interesting to debate, it should be quite clear that the bears consistently have be wrong about their impact on the market. Trump has been such an easy argument for market disaster, but it has been spectacularly wrong to look for a market top based on anything he has done. The bears' response is "Just wait'!" Well, we are still waiting, and when the price action shifts we will change our approach.
Don't allow your political biases to influence your market views. It is especially easy to do if you are a Trump critic, but we have another example right now of how media hysteria over his actions doesn't have much meaning to the market.
We shall see what the jobs report brings. The pattern has been for momentum to quickly die out after a day like yesterday. If that happens you can be sure that Trump will receive the blame, but the more likely explanation will be that the computer algorithms are simply reacting to price patterns.