rock 'n' roll, the rally from the mid-March lows can't be stopped. At least, it wasn't stopped this week, despite myriad obstacles in its path, including a four-year low for the dollar index, a string of lackluster economic reports, new supply of stock and the onset of shares' seasonally weakest period. Despite all that and more, the Dow Jones Industrial Average rose 3.3% for the week, while the S&P 500 gained 3.5% and the Nasdaq Composite jumped 4.8%. Among sector indices, the Philadelphia Stock Exchange/KBW Bank Index rose 3.7% for the week while the Philadelphia Stock Exchange Semiconductor Index rallied 5.3%. Perhaps more important than weekly gains were the technical accomplishments, most secured Friday. Despite a higher-than-expected rise in the unemployment rate, the Dow rose 1.5% to 8582.68, the S&P gained 1.5% to 930.07, and the Comp rose 2.1% to 1502.88. These were the highest closes for the Dow and the S&P since mid-January, while the Comp closed above 1500 for the first time since mid-June. The Dow's close left it above its March 21 close of 8522, thus "confirming" the recent breakout by the Dow Jones Transportation Average. Similarly, the S&P 500 eclipsed its April 23 high of 919.70, and in the process broke through its long-term downtrend line at around the same level, a potentially bullish development. Meanwhile, the Comp surpassed its Dec. 2 closing high of 1484.78 and now appears poised to challenge its intraday high of that day, at 1521.44. To varying degrees, each of those resistance levels had proven difficult for major averages to surmount at various points prior this week. The surpassing of those levels Friday may have compelled some short-sellers to cover their positions, aiding the advance. Friday's session, and the week as a whole, seemed to end the debate over whether technical factors lead fundamentals or vice versa. There was very little on the fundamental front to get excited about, save for another 2.3% weekly drop in crude futures and better-than-expected results from Dow components McDonald's ( MCD), DuPont ( DD) and ExxonMobil ( XOM).
Lower energy prices and solid corporate results are no small matter. But the bulk of fundamentals news this week was titled toward the downside.
Rosenberg believes the details of the jobs report will prompt the Federal Open Market Committee to adopt a risk-assessment statement titled toward economic weakness at its May 6 meeting. But neither he nor most economists expect the Fed to ease and Fed chairman
Alan Greenspan didn't hint as much at Wednesday's congressional testimony. The report was not, however, enough to quell traders' desire to buy shares or hopes that robust economic growth lay right around the corner. That's even though leading economic indicators continue to forecast "a gradual return to subpar growth," as described by Economic Cycle Research Institute managing director Lakshman Achuthan. The ECRI's weekly leading index rose to 119.5 from 119.0 while its four-week moving average rose to flat vs. negative 0.1% a week ago. dollar's unraveling, a lack of sufficient volume surge and relative strength indicators confirming the advance, too much speculation, too much bullish sentiment (by various measures), etc., etc. "Underlying fundamentals show no reason for a continued rally, and the market's internal measures show an increasing probability for a reversal," commented Richard Williams, strategist at Summit Analytic Partners, effectively summarizing the naysayers' position. Scott Bleier, founder of HybridInvestors.com, is cautious about the market's near-term prospects, but he said the worrywarts are missing the bigger picture and the genesis of the current rally. "The problems we have now are nothing vs. four months ago," Bleier contended, referring most directly to prewar anxieties. "Things might not be great but they're better. That creates a big 'sigh of relief' effect and powerful bullishness." Such optimism may prove foolhardy, but it was very much in evidence this week, especially Friday.