Another Wild Card Friday

Unemployment numbers released this morning came in  worse than expected and the market did what? you guessed it....it went up! In a mysterious manner, less than positive news somehow have a calming affect over the markets as fear abates and risk trade is back on. The S&P500 stopped dead in its tracks at the 1150 level. But other indexes like the Nasdaq, Russell 2000, Dow Jones Transportation, to name a few have already extended gains beyond their January highs. Lagging behind are the financials. Banks are among the most vulnerable with respect to exposure to sovereign debt. Although the situation in Greece seems slightly better now, the country is still faced with wide spread strikes and demonstrations, with some violent outbursts. The sustained demonstrations call into question the eventual success of the Greek austerity plan and remind us that market sentiment is fragile at best.

Friday's retail numbers and consumer confidence report will be key. If the risk trade is to sustain its momentum, it will need some better economic readings than what we've been seeing lately. The uptrend is decisively strong, and a break above 1150 will most likely occur with a gap up from today's close. Lousy retail numbers, however, are likely to dampen the flames. Because even if Greece's problems become completely contained, lack of consumer participation is still a major drag.

As expected, the US dollar has been consolidating and slightly pulling back on the backdrop of mild economic readings. As we've mentioned, the dollar is a win-win if we see either very strong readings or very bad readings - mild economic readings are the dollar's kryptonite. Still, any DXY pullbacks are expected to be shallow since both the euro and the GBP remain largely under pressure.

As fear dissipated from the markets, the yen has receded considerably, a trend likely to continue over the next few days.