Trader on jobs number: "Bob, if this market can't go down on that number, its not going down...Looks good going into end of year."
And that's where traders' heads are at: the jobs report was the biggest report of the month, and they are now trying to figure out how to play it going into the end of the year.
First, traders are assuming QE2 (quantitative easing) and that the Bush tax cuts will be extended for everyone. Including capital gains. And they are assuming more stimulus is coming, including the possibility of a partial payroll tax holiday.
After that, ask a trader about where we go toward the end of the year, and half the time they say, "Depends on where the dollar is going..."
Here's the bigger question: are investors moving out of bonds and into stocks in any big way? No, not yet. And without that, without a feeling that owning stocks are respectable again, it's going to be tough sustaining a rally and going into a new bull market in 2011.
To get that, we may need a collapse in the bond market. Or we may need the S&P 500 to hit 1,600....which would be an HISTORIC HIGH, not a 52-week high. Something that generates headlines.
Another worry: commodity inflation. Wheat up 4%, corn 3%, oil 1.5%, silver 2.5%, soy 1.5% today...but wages in today's data was lower. How can that not be a problem at some point in the story?
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