A strong rally, but still short of breaking out

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters

Friday saw a strong, broad rally that for the most part has held its early-morning gains. Four stocks advanced for every one declining; eight of the 10 S&P 500 sectors rose more than 1 percent.

Why are bond yields down today and not continuing the rally we saw all week? It goes back to that "Goldilocks" idea, just strong enough to indicate that the job market is back on track, but not so strong to scare anyone into thinking that June is the likely month for the Fed to hike rates.

The lower yields were a help to homebuilders, building materials and REITs—all interest-rate sensitive sectors—though that outperformance faded a bit late in the day.

Here's the conundrum for stocks: the Fed can't easily raise rates because of the weak economy.

But the markets can't break out because of the weak economy.

And that's where we are: back up to the top end of the trading range. We've been here before, with no follow through.

For bears and skeptics in general, it's hard to see a major breakout with stretched valuations, mediocre earnings and the Fed raising rates.

One thing's for sure: the key level everyone is watching is roughly 2,120 on the S&P 500. We closed at 2,116. Short again!