Bonds to Make or Break the Market

The indices actually look quite healthy on their weekly charts. There will certainly be some backing and filling along the way, but the immediate trend is up and the dogs are running. We don't need to mention that breadth figures are still poor and that this run might be heading up on fumes because a rally is a rally is a rally and profit can be made only by trading with the crowd when the market is rallying. If the QQQQ can make it over $43 we see no reason why it couldn't run to $45 over the next four or five weeks; especially now that the semi conductors are coming along. "One of the issues that is now giving the market some relief, where it has been under pressure over recent months is the bond market. Today the market could get a real boost from the bond market depending on how bonds respond to the employment report to be released before the open today. Bob Carver explains this better than we can: A data challenge will come Friday morning in the form of the March Employment Report. While the headline numbers are purely fictional in terms of new jobs, unemployment rate, etc., the market will lap them up and trade on them (as they say in computer circles, "Garbage In, Garbage Out"). According to the current Treasury Secretary, John Snow, we should be looking forward to a strong Employment Report (his basis for such a prediction is uncertain -- most observers suggest his role is more of a cheerleader). If the bond market has taken his prediction to heart and the numbers turn out to be weaker than they expect, we could finally get that countertrend bond rally we've been looking for. And, that would certainly help the stock market rally as well." On the other hand, a very strong Employment Report could forestall such a rebound in bonds. At the present time, bonds are extremely oversold, so it will be quite instructive to watch the reaction of bonds to the report. If the report shows a strong economy and bonds don't sell off and turn around and rally, it indicates at least a short term trend change in the bond market to the upside. And, that would help light the fire under the stock market. Often it's better to simply wait until the news comes and gauge the reaction of the market to the news before taking a position. We've seen the bond market rally in the face of extremely bad news before (to the bond market, a strong economy is very bad news indeed).