Market Alert - The Close

The most feared rally in recent history continues, flying in the face of GS, JPM, Gundlach started it, Bill Gross joined in, and today it was reported that Carl Icahn is still massively bearish. They may ultimately be correct, but it was not Friday as stocks, dormant on the NYSE for three weeks, shot higher on another 'stellar,' 'blowout,' 'recovery verifying' jobs report. Oh really now? Of course we will look at the numbers for you in detail. Surprisingly, we and the few others that pay attention to the report details were not the only ones pointing out the deficiencies, that this time include as glaring a massive, multi-standard deviation seasonal adjustment as ever seen -- as well as the usual heavy skew toward lower wage hourly positions.

As is usually the case, however, the headlines ruled. Moreover, after the pitiful GDP report the prior Friday, the rubber match jobs report gave investors enough confidence that the market rallied on perceived good news. In other words, the jobs headline was viewed as convincing that the economy was improving enough to support stock prices even if the Fed feels compelled to hike.

Stocks shot higher and never looked back, though as is often the case in these situations, most of the move was in the books at the open and after the first hour or so. Enough to push more indices to all-time highs. Now that the jobs report 'confirms' economic recovery, I would suppose new highs are appropriate.

SP500 new high. SP400 new all-time closing high. NASDAQ at a new closing high but not intraday high (5231.94 high in July 2015). DJ30 showed a great bounce and is on the road to a new high. RUTX finally broke into the last range in 2015 that holds the high. SOX took off upside again and is on the way to another new post-2000 high.

SP500 18.62, 0.86%
NASDAQ 54.87, 1.06%
DJ30 191.48, 1.04%
SP400 1.01%
RUTX 1.45%
SOX 1.34%

VOLUME: NYSE +6%; NASDAQ +5%. NYSE trade was higher but still disappointingly below average. NASDAQ trade moved back above average on a break to a higher high. NASDAQ continues to show solid price/volume action with several rising, above average volume sessions on the move higher.

A/D: NYSE 2.6:1, NASDAQ 2.6:1. Good, not great.

So, the stock indices received their catalyst. Earnings, BOJ, BOE, the Fed, weak GDP, Durables Orders, Factory Orders. More rate cuts (as Bank of America noted, there have been 666 rate cuts by the world central banks since LEH; ooh, spooky). Mere child's play. The indices were at the 'go, no go' point for a continued upside move and jobs gave them the 'go' nod.

We picked up a couple of positions on the day, a Motel/Hotel REIT (oh so sexy -- but the gains will be) and CPHD in electronics. For the rest we mostly let them run. We could have banked quite a bit of gain, but it was a new breakout move and you hate to cut off a potentially lucrative new leg on day one. We did take some AVGO gain as we had not taken any yet. Other than that, we let them run.

Perhaps Monday there will be some buyer's remorse. Doubt it, however. Too many are betting short, and even at new highs they can be squeezed more and more before they scream. At most we may get a bit of early softness, but if we see that we likely use some of that to buy as others probably will as well.

The jobs report was quite frankly more of the same in terms of the type of jobs created, and it had the extra spice of being massively adjusted many times historical norms. I am sure Jack Welch was spluttering his oatmeal this morning when the report came out; remember, he argued the jobs reports ahead of the 2012 election were rigged. Of course we later learned that was correct. Still, it makes for a good joke to help you laugh instead of cry about how our institutions are pretty much untrustworthy.

But, it was enough for the market to continue higher whether based on a mirage or not. I would love to say it was real, that we were creating great jobs. Since I cannot, in the alternative I will take solace in making money on the moves.

Have a great weekend!

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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