Talking Numbers

Two events that could move the market

Two events that could move the market

It's make or break time for the record rally.

That's because two huge events this week could determine the market's next move.

First is a meeting of the European Central Bank, which is expected to cut euro zone interest rates. That may not sound important for U.S. stocks, but indirectly it is. Lower European interest rates are considered a factor as to why U.S. rates are lower than expected. (For more, see this recent discussion on "Talking Numbers" about European and U.S. interest rates.)

Second is the U.S. jobs data for the month of May, to be released Friday. The official unemployment rates dropped to 6.3 percent in April while nonfarm payrolls gained 288,000 jobs.

(Read: US stocks seen boosted by upbeat China PMI data)

According to David Seaburg, head of equity trading at Cowen and Company, the markets have already priced in an interest rate cut from the ECB. Instead, he sees the U.S. employment figures as being the most important thing for the market right now, especially after the revised first-quarter U.S. GDP showed a contraction of 1 percent.

"We just put up a negative print in GDP," said Seaburg. "The unemployment number is extremely important right now. The market right now is factoring in that we're going to see 3 percent growth in the second quarter."

Should second-quarter GDP fail to grow as anticipated, the market could start moving down, according to Seaburg. Friday's employment data will indicate whether GDP will gain 3 percent.

"I think the unemployment number is going to be very crucial in determining whether or not we start to see that," Seaburg said.

However, the technicals aren't painting a bullish picture for the market, according to the S&P 500 charts of Mark Newton, chief technical analyst at Greywolf Execution Partners.

"The S&P has gotten way ahead of itself just in the last few weeks," Newton said. "We have nearly a 3 percent move in the last 20 trading days and it's been up 16 of the last 20 trading days. Not only is it overbought on a short-term time frame, but the intermediate-term momentum is still waning. So, that's a concern."

Newton also sees problems with the S&P 500's technicals because he sees it as trading at the top of a six- to eight-month trend channel.

And then there's the calendar.

"We're seasonally entering the worst month of the year in a mid-term election cycle," he said. "That's the month of June, where the S&P and the Dow usually average between 1.9 and 2 percent to the negative since the year 1950."

(Read: Why all the correction calls have been wrong)

Sentiment has also gotten "a little bit exuberant" in the last few weeks, Newton said.

"Those few reasons make me want to take a little cautious standpoint from a short-term perspective," added Newton. "I think that the S&P probably will back off and now is not the right time to be putting new money to work."

To see the full discussion on the S&P 500, with Seaburg on the fundamentals and Newton on the technicals, watch the above video

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