Stocks finished higher last week as bulls prevailed in a major way at the first real inflection point we've seen this year. After beginning the year with a vicious rally, stocks faded the second half of February, with back and forth action giving unclear signals of market direction. After backing into the 200 day moving average, bulls kept the rally hopes alive with a big upside reversal Thursday along with upside follow through Friday.
Keeping things simple -- stocks pivoted exactly where they needed to Thursday. The follow through day Friday is important in this context. Thursday's low becomes a very important support level for this current rally that could be just beginning. If we see Thursday's low violated in a major way, that would indicate this is another fake-out rally and the volatility should be expected to continue. We saw very constructive action this week though.
For economic data and news this week, we have monthly factory orders being reported tomorrow. Tuesday, we'll get a closer look at Powell's decision to raise rates, as the Fed Chair testifies before the House Financial Services Committee. On Wednesday, we get the JOLTS job openings report. On Thursday we have initial jobless claims to get a better idea of the labor market.
We should be looking for the market to digest the gains from Thursday/Friday and not expect a thrust higher early in the week after such a large move to end last week. As long as the bulls don't completely give up the move, it's seen as a win this week. If we see early weakness followed by strength later in the week, it would not surprise me in the least. Continue being tactical out there and keep looking for singles and doubles as this market will surely continue with the volatility.
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