Kevin Cook here for Steve for a few days as he travels…
The market reaction to Friday’s disappointing jobs report was likely even more of a letdown for bears who were no doubt hoping for acceleration to the downside. Instead, most of the damage was quickly priced-in at the open, based on the futures drop below S&P 1,380 on Friday, and the rest of Monday’s session was filled with bargain hunting and short-covering. I think the long weekend gave money managers plenty of time to calmly evaluate the data and their current positions.
As Zacks Director of Research Sheraz Mian asked Monday morning, “Was Friday’s jobs miss a weather-related payback, or a recurrence of a fundamental weakness along the lines of what we encountered around this time in 2011 and 2010? I would say it’s all weather, with the boost from the warm winter months getting reversed in March, but the overall positive trend line remaining in place.”
Damage has nevertheless been done to the bull camp above S&P 1,400. So, unless the bears get a stronger, scarier catalyst in their favor, we are now officially in a big, sideways trading environment. This is the market that Steve suggested was most probable as Europe regained the headlines, and that I thought we’d see until we got more evidence from earnings season about the economy.
We’ll most likely mark time for a few weeks in a 50-point range between 1,400 and 1,350. Incidentally, the Dow touched and closed below its 50-day moving average (at 12,980) for the first time since December, so the March swing low at 12,735 is close and being closely-watched.
Bottom Line: Bull market is still intact, but it needs some time to sort out winners and losers for the next leg higher.
Best,
Kevin Cook
Senior Stock Strategist, Zacks Investment Research
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