9:10am (EST)
No other country can substitute for the U.S. The U.S. is still number one in military, number one in economy, number one in promoting human rights, and number one in idealism. Only the U.S. can lead the world. No other can. – Senior Korean official (to Thomas Friedman, NY Times Foreign Affairs columnist, February 2009)…
The bulls continued their comeback from the mid-March lows after having another solid week and pushing the market back towards its February and 52-week highs. It all came down to Friday’s jobs report and it was a “winner”. We aren’t sure if Charlie Sheen was impressed with Friday’s 8.8% unemployment rate and the 216,000 jobs added but we were.
The market ended the first quarter with a bang and got off to a nice start for 2Q after getting its best nonfarm payroll numbers in two years.
The Dow traded to an intraday 52-week high of 12,419 before finishing with a 57 point gain on Friday and settled at 12,376. For the week, the index added 156 points, or 1.3%. For the first-quarter (January-March), the blue chips advanced nearly 800 points, or 6.4%, which was the best quarterly gain since 1999.
The S&P 500 added 6 points to finish at 1,332 and held the 1,300 level all week. The index also made a strong move above 1,325 on Wednesday and reached a high of 1,337 on Friday. For the week, the S&P jumped 19 points, or 1.4%; for the quarter the index popped 75 points, or 5.4%.
The Nasdaq cleared 2,800 on Friday but closed slightly below this level with a gain of 8 points, to 2,789. Tech has led the recent charge off the mid-March lows and advanced 46 points, or 1.7%, for the week. For the first 3 months of 2011, the Nasdaq was up nearly 140 points, or 4.8%.
We mentioned on Thursday that if the unemployment rate came in below 8.9% we could see new highs. The 5-week “trading range” the market has been in since mid-February is on the verge of a breakout and here were our thoughts in late January before the range:
“The Dow gained 4 points to close at 11,989 but made its second straight trip above 12,000, hitting 12,019 intraday. We mentioned yesterday the index has a shot at 12,300-12,350 over the near-term and we would like to see a close above 12K today.
The S&P 500 finally kissed 1,300, twice, once in the morning and once in the afternoon before finishing just below resistance at 1,299.54 – up 3 points. We are looking for a pop to 1,325 and maybe 1,350 on a breakout.
The Nasdaq was the strong horse as it added 15 points, or 0.6%, to settle at 2,755. The index is still 9% away from our 3,000 target and we have said it may be hard to reach this level over the near-term. We may only get to 2,850.” (END)
On February 17, after a trip to these levels, we had this to say:
“The only number we have been watching this week is 1,334 which represented a double or a 100% rise from the S&P 500’s low of 667 back in 2009. We said last Friday that “1,325 Changes Everything” and only confirmed our target of 1,350 was in the cards. The index battled 1,334 for 3 sessions before breaking through yesterday after gaining 8 points to close at 1,336. Back in mid-January we said if the bulls could get past 1,300 then we could see 1,450-1,500 in 2011. However, let’s get to 1,350 first.
The Dow actually traded into our target zone of 12,300-12,350 after kissing 12,303 but finished the day at 12,288, up 61 points. If the upper-end of our zone is taken out then the bulls will be gunning for 12,500-12,600 over the near-term with a run to 13,000 coming if the momentum can last until April.
As for the Nasdaq, the index finished at 2,825, up 21 points, and closed right in the middle of our 2,800-2,850 targets. Of course, we have been mentioning a run to 3,000 since the beginning of the year and a break above here gets the bulls there.” (END)
The market appears to be moving past the Libya and Middle East crisis although oil continues to move higher. Japan seems to be hitting the ground running as rebuilding efforts have already begun. And America’s economy seems to be getting better despite the fact that housing remains in the doldrums.
The CBOE Market Volatility Index (^VIX, 17.40, down 0.34) traded down to 16.44 on Friday after touching 31.28 in mid-March. We mentioned last week the index could fall to 14-13 on another leg up which is when we think the bulls might take a break.
A VIX reading under 20 indicates confidence and calm while a reading above 30 indicates nervousness and panic.
We also mentioned the iPath S&P 500 VIX (VXX, $29.09, down $0.28) could head lower if the market rallied higher. The April 30 puts (VXX110416P00030000, $1.85, up $0.09) were at $1.50 last Sunday and gained over 20% by the end of the week.
We are hoping for one big charge by the bulls over the next few weeks and we would like to see a strong start to this week to get us there. April is normally the Dow’s best month and has posted gains of 2%, on average, for the past 60 years. Of course, history doesn’t always repeat itself but the catalyst for the market breaking out to new highs will be first quarter earnings which begin next Monday.
Alcoa (AA, $17.47, down $0.19) will announce their results on 4/11. Keep an eye on our aforementioned near-term targets for this week: Dow 12,500-600; S&P 500 1,350; and Nasdaq 2,850. If these levels are cleared then we could go into earnings season looking to test our upper-end 2011 targets for the indexes.
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