(Read more: Why Friday's jobs number is make or break)
The positive data sent the stock market higher on Wednesday, after testing support at the 1,625/1,630 range on Tuesday when the Fed just happened to be adding some $5 billion worth of stimulus. On Wednesday, it pumped another $1.5 billion into the system, surely to help calm the markets over the growing crisis in the Middle East, which only brings up the whole tapering conversation—will the Fed dial back its bond-buying program, causing potential market instability while the country is debating whether to send cruise missiles into Syria? I'm just sayin'.
For markets, the law of unintended consequences should never be lost from the analysis—remember what your ninth-grade science teacher taught you—"You can never just do one thing. One action can cause multiple reactions."
And this is what investors need to keep in mind while strategizing about Fed tapering and the effects of military action in the Middle East as one strike may force a reaction by some of the other "bullies" in the region. This is another reason why I think that the Fed will continue to use its QE cruise missiles to keep the markets supported until this immediate threat goes away.
With less than two weeks until the famed Federal Open Market Committee meeting, the Fed continues to analyze the data and that data were solid. This is consistent with much of the recent commentary and of brighter days ahead, but does not discount the near-term volatility and potential downside pressure during September and October.
(Read more: Taper? This Fed official wants to step on the gas)
The Beige Book report, a summary of commentary on current economic conditions from each of the 12 Federal Reserve Banks, showed that the economy continues to grow at a "modest to moderate rate" in some districts. Consumer spending is supposedly improving and cars are selling at a "robust" rate. Hmmmm. (The report gathers "anecdotal" information from their districts by conducting interviews with businesses, economists and other "market experts" to assess the state of affairs across the country. This report is published eight times a year right ahead of the FOMC meetings with the next meeting scheduled for Sept. 17-18.)
Next up, new car sales plus-17 percent (low interest rates) with customers scrambling for certain models, all considered compacts, including the Nissan Sentra, Ford Fusion and the Subaru Forester to name just a few. The turnaround in U.S. auto sales is being described as "phenomenal" by some. Doug Waikem, a car dealer in Massilon, Ohio, said, "It hasn't been like this since the '80's."
Wednesday's report has auto sales running at 16 million annualized units. At this rate, car companies can actually turn a profit after some real cost cutting and overhead reductions. They have closed dozens of plants across the nation and Canada, cut union wages, cut health-care benefits and they have buried some iconic brands like Pontiac and Mercury. They have eliminated dealerships across the nation and have smartened up and stopped "stuffing" dealers with inventory that would not sell.
All of this is good for the industry and with artificially low interest rates consumers are responding.
Wednesday's stock market strength, although positive, was still not convincing. The market rallied (the S&P closed at 1,653), but failed to really test resistance at 1,662, leaving us in that 1,625/1,662 range.
Although the bounce may pick up some steam before reversing, investors should realize that overall volumes will contract as many celebrate the Jewish holidays potentially exacerbating the volatility. I would expect the market to churn here before moving a bit lower ahead of the FOMC meeting.
