Today, we might have gotten the catalyst the market has been looking for. First, the jobs number came in much better than expected. Next, ISM services jumped from 53 to 56.8. The economic news was excellent and the market gaped higher on the open. Unlike the price action during the last two weeks, stocks feel like they want to grind higher. The market is challenging a major resistance level at SPY 135 and it doesn't feel like it's going to back off. This week the PMI's in Europe and Asia were pretty good.

The market is off to a rocky start this year. Stocks shot higher Tuesday after China posted a better-than-expected PMI. Traders digested the news and realized that it was not that encouraging. Europe's PMI had fallen for the fifth consecutive month and it came and at a dismal 46.7. Furthermore, many analysts believed that China would lower bank reserve requirements and it did not. Stocks tested the downside Wednesday and spent most of the day grinding back. This morning, a fantastic ADP employment report showed that 325,000 jobs were added to the private sector.

Yesterday's rally felt a bit "fluffy". China's PMI came in better than expected, but it was still weak. Their stock market has been closed and when it reopened last night, it declined 1.3%. Furthermore, Europe's PMI fell for the fifth straight month. The 26 point S&P 500 rally could not be justified by the news. Throughout the day, stocks drifted lower. Overnight, China's Finance Minister said that he sees a relatively difficult first quarter. He sees downside pressure on the economy, weakening external demand and rising costs.

The price action this week has been rather subdued. Most Asian markets have been closed to celebrate the New Year and the economic releases have been minor. Traders are focusing on earnings and the results are in line. Yesterday, the Fed provided a spark when they set a zero rate policy through 2014. The printing presses in Europe and the US are running at full speed. Stocks had a mixed reaction initially, but they eventually rallied on the news. The Dow is close to a 3 1/2 year high. Conditions feel like they are improving, but the Fed obviously has concerns.

What is there to say that I haven’t said already?
If you were not privy to the stats that I  provided last week by the wonderful sentiment analyst Jason Goepfert of Sentimentrader.com here you go:
Starting around the 2nd week in January, stocks have had a consistent tendency to weaken.  Or at least not show much strength.  Especially [...]

Over the weekend, China released its PMI and it poked back above 50. That was better than expected, but it is far from robust. Europe's PMI declined for a fifth straight month and it came in at a dismal 46.9. The focus has been on China this morning and stocks are pushing higher on the news. This will be a very busy week for economic releases in the US. ISM manufacturing rose to 53.9 and that was slightly better than expected. On Thursday, ADP employment, ISM services and initial claims will be released.

Last week, the market broke through major resistance and we saw follow-through buying. Stocks have rallied 10 consecutive quarters during the early part of earning season. Many of the strongest companies post results early in the cycle and optimism builds quickly. This morning, the price action is very lackluster. China's market will be closed this week as they celebrate the New Year. Many analysts anticipated a reduction in bank reserve requirements ahead of the holiday and it did not happen. Economic conditions have stabilized, but they are tenuous.

The market rallied hard making it the 9 out of 11 tradings days with positive gains. SPY has made since 4.2% during that time, but over the past month SPY has made a staggering 8.7%. And as expected, now we are seeing sentiment change.
But, I am not completely sold on the rally yet.
Why? Well, other [...]

January’s rally was admirable.
It’s perseverance frustrated bears.
The infrequent single day declines maxed out at -0.6%.

And the last nine days of the month were more than mind-numbing for most traders as the market traded in a very tight range.
There’s no doubt the bears are ready. Almost every technical and sentiment measure I follow has pushed into a [...]

Numerous downgrades, more European woes, news of inevitable Greek default, financial sector struggles among other bearish news led to a lower, oops, higher open today? Yes, higher.
It has indeed been rather frustrating as a short-term bear since the gap open on 1/3. But, oftentimes when you are a contrarian and you make your livelihood on [...]