All Economic Releases Missed This Week – Market Does Not Care – For Now

Posted 10:00 AM ET - Stocks are moving higher this morning and the market is poised to make a new high. In March, 192,000 new jobs were created. This was a little worse than expected (200K), but traders liked the number. ISM manufacturing, Chicago PMI, ISM services, ADP, initial claims and the jobs report all came in light this week. Traders are willing to blame bad weather and they have given these releases a "free pass". Weather conditions will have a smaller impact each week. If there is massive pent-up demand, it should have surfaced in March. Although the market likes the jobs report, this was not a strong number. We need 250,000 jobs each month just to keep up with new workers. The slowdown in China is no longer grabbing the headlines. Their government announced a fiscal spending program and there are rumors that real estate restrictions will be lifted. In recent weeks there have not been any new defaults and credit concerns have temporarily subsided. I am reading reports that suggest there is a massive cash crunch in China. This could be the spoiler and conditions could deteriorate very quickly. Asset Managers wanting to reduce risk will let this market run so that they can sell stocks at higher prices. We have seen a decent amount of selling in recent weeks and a rotation into bonds (flight to safety). Not many Asset Managers feel that they will miss the next big rally. They won't chase stocks at an all-time high. At best, they will nibble. Earnings season starts next Tuesday. JP Morgan and Wells Fargo will post results on Friday. It will be a couple of weeks before the action heats up. Profits are expected to be flat year-over-year and revenues are expected to increase 3.5%. Stocks are trading at a forward P/E of 16 and they are not cheap. I don't trust this rally. My first target is SPY $192. We would need to see a huge economic "pop" to reach SPY $200. If you choose to trade this breakout, use SPY $188 as your stop. Focus on stocks that are breaking through horizontal resistance and use that level as your stop. Keep your size small and set targets. I will be day trading - I want to keep my overnight risk exposure very small. My goal is to monitor selling pressure. I want to see how far Asset Managers are willing to let this market run before they take profits. We should see positive price action for a few more weeks, but resistance will build towards the end of the month. If economic conditions do not improve substantially, we will see a correction in May. Trade the breakout, but be small and be cautious. . .

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