Much better-than-expected jobs numbers drew little more than a collective yawn from Wall Street on Friday, and some market experts think that could actually be a good thing.
After initially indicating a strong rally following the release of nonfarm payroll numbers, stocks quickly pared gains and traded in a tight range into the afternoon. That could be seen as a surprise, given the market's hypersensitive reactions to economic data points during the bear market of the past year.
But the modest move higher also might be a sign that investors have raised their expectations of the market and are no longer worried about doomsday scenarios. That type of mentality is traditionally another ingredient toward the formation of a bull market, experts say.
"If we continue to run on better-than-bad, we're going to create a scenario where good may not be good enough," said Michael Kresh, president of M.D. Kresh Financial Services in Islandia, N.Y. "A little pause is fine, and if the trend continues then we can start moving up again."
Stock index futures initially surged after the jobless claims number came out, popping more than 100 points on the Dow and indicating the market would open up by more than 1 percent.
But weakness quickly crept into the market as debate grew over whether anyone should be cheering that loudly over 345,000 lost jobs and an unemployment rate of 9.4 percent. The latter figure was actually worse than analyst estimates.
"What we're seeing here is a bear market rally," Jim Lacamp, portfolio manager at RBC Wealth Management, told CNBC. "It could go higher, it could go substantially higher, but it is usually not the stuff that bull markets are made out of."
That analysis was somewhat gloomier than a lot of other sentiment coming from investment advisers.
Nomura Global Economics said in a note to clients that "the jobs report reinforces hopes that the recession may end some time this summer" but noted that the move higher in the overall rate was "less encouraging."
The market's behavior on Friday was mostly consistent with the data and fed into trends followed at Schaeffer's Investment Research in Cincinnati. The firm has turned more bullish on stocks, partly on the belief that the market is acting more rationally and not interpreting otherwise weak data as reason to rejoice.
"We're talking about some pretty strong technical overhead levels, which could be the market telling us something we've been telling our subscribers: Don't take an overly bullish stance, don't take an overly bearish stance," said Todd Salamone, senior vice president at Schaeffer's.
"Hedge your exposure. Be open to an anything-can-happen environment. On one hand it took less bad data to rally the market (previously). Now investors are getting used to that. It will take more than that in the months ahead."
Along those lines, Salamone encourages investors to use call options—a bullish play—on tech companies such as Juniper Networks, but to hedge that by buying puts on the Power Shares QQQ ETF, commonly known as "the Qs." The Qs gains with moves higher on the Nasdaq, so buying a put would be a safety play in case the Juniper pick doesn't pan out and tech stocks lose value.
Likewise, Kresh is shorting longer-dated Treasury bonds now, believing that prices on government debt will continue to suffer due to over-supply and other factors. He has tempered his moves in stocks.
He's hoping investors follow suit and wait until there are significant signs of improvement, not just an abatement in bad news, before piling back into the market.
"For the intermediate term what I'm concerned about is if the market gets ahead of itself and then takes another correction," Kresh said. "The retail investor who's getting back into the market now could be placed in such emotional shock that they may be out of the market for a decade. That is one of the reasons I'm happy that the market is slowing down."
"We don't want to create for the retail investor a situation where the only reason I'm investing is because I missed the boat. Then they get on and they find out they're on the Titanic."