After a volatile week for the market, it looks like the bull case for stocks is intact.
The payroll numbers on Friday appear to have shaken the S&P 500 out of its correction phase. The data landed in the "sweet spot"—it was decent, but not good enough to suggest the Federal Reserve will pull back on bond purchases anytime soon. The stock market appears comfortable with the notion that the Fed probably won't announce a reduction in purchases until the October meeting at the earliest, and only in conjunction with evidence of an improving economy.
The technicals are also looking good for the market. If the June S&P e-mini contract can settle above 1,646, I will consider this a confirmation of the bull flag breakout, and adopt an initial upside objective of about 1,677. A close back below 1,630.09 would convince me that I was wrong.
The bottom line is that equities still look good compared to current yields in bonds, even after the 10-year yield increased from 1.6 percent to 2.17 percent in the last four weeks.