Will Friday Be A Defining Day?

Once again, technology led the market.  The NASDAQ was up
over 1%, rising a stiff 20 points to 2015 and pulling within seven points of the
50-day moving average, which has been our target since the NAS bounced off its
200-day average some 7 trading sessions ago.  Also note that the RSI line is
bouncing off 50, which we noted might serve as minor support. You’ll recall that
we have been noting a rotation into technology for the past week, a significant
development and another positive for market bulls.

 

Although not as strong as the NAS, the cash S&P was
nonetheless up a powerful 5.96 points, ending close to a point away from our
50-day moving average target.  On Friday, this could be the index to watch.

The worst-performing index of the day was the Dow.  Early
in the morning the Dow Jones and Company announced that three stocks were being
pulled from the index, and this unexpected news was a drag on the market’s
measure, as the cash Dow only gained some 15 points on the day.  However, the
big board once again displayed strength, with advancers beating decliners by
close to a 2 to 1 margin. 

Unemployment Report: Surprise!  Not only was this month’s
jobs report a surprise, but the revisions from the previous months has deep
implications on the Fed’s interest rate strategy.  I’m not going to go into all
the details of the obvious numbers, but I think it is important to note that
this report changes many core assumptions on the markets — including mine.

Prediction for Friday:  We’re obviously headed higher on
Friday.  The question is, will Friday be a defining day for the near term
direction of the markets?  Will the indices move to test the recent highs? 
While the pre-open futures markets are soaring, I think a question that needs to
be raised is what will this number do to interest rates?  At what point will
interest rates become a bogy for the markets?  These are questions we’ll be
looking to answer in the coming days.

On the upside with the Dow, we’ll watch the 10480 level,
then again 10520.  Any move over this level might be a little overdone.  On the
downside, we’ll watch to make sure the 50 day moving average holds, which I
would expect.  If the 50 day can’t hold that would indicate a significant amount
of weakness.    

Charts from
www.stockcharts.com