Updated: 07-May-01
General Commentary
Friday morning's jobs data were much worse than expected; the market opened sharply lower in reaction to the data; and then the big money investors stepped in and did just what Briefing.com said they would - they bought the dip... The result, an eye-opening turnaround which has bears/shorts very, very nervous... Though end gain of 45 points was nothing too spectacular, the Nasdaq finished at its session high and more than 100 points off its opening low.
While many on the street expressed surprise/shock at the market's resiliency it's largely because they've been too busy telling the market what it should do rather than listening to the message of the market... As odd as it may seem, just because the near-term economic/earnings picture is bleak doesn't mean stock prices must go lower... The Nasdaq tumbled 68% from its old high in anticipation of the current economic/earnings mess... By moving sharply higher over the past month amid steadily improving internals (a/d line, new highs/new lows, volume, etc), market has been telling us that the bad news is in and that it is safe to look past the abyss to the time when earnings/economy begin to improve.
Market now sees that turn taking place in Q4... For this rally to loose steam, traders will have to be convinced that the recovery is further down the road - much further... We aren't likely to get a good sense of that until Q2 warnings season, which remains several weeks off... In the meantime, traders looking at the powerful tape, and at the prospect of another 50 to 100 basis points in rate cuts, and they want in... And the higher the market climbs, the more sidelined investors will feel the need to get in themselves and the more shorts will be squeezed... That's how momentum builds, and it is building - ugly economy or not.
While the large-cap companies with proven earnings streams continue to dominate the action, we did see participation expand to the second and third tier players late last week... Another bullish signal... Look for more of this behavior in the week ahead, as investors search for those shares left behind during the first push higher.
Though earnings slow to a trickle this week, market will be focusing a lot of attention on Cisco's (CSCO) numbers due after Tuesday's close... Global Crossing (GX) and Electronic Arts (ERTS) are among the other notables due to release results over the next few days... Even if these companies disappoint, we doubt that they would carry enough weight alone or together to knock the market off its current path.
Robert Walberg |
