The market was oversold. The payroll data was better then expected. Oil prices were dropping. Rally, rally, rally. The bullish argument to take away from the payroll numbers, where the previous two months were revised significantly higher, is that going into the hurricanes the economy was strong, strong , strong. With hurricane season almost over, and reconstruction money pouring into the gulf, it may have all been just a bump in the road with sunny skies ahead. Only a hawkish Fed and higher inflation are restraining prices.
Bears point out, you don't fight the Fed, much higher heating bills lie ahead, and Mutual Fund cash levels are at record lows.
I believe we are now going to test the upside. How far will this rally carry and with what kind of volume. 1210 seems like the first line of resistance in the S&P. Energy is still the wild card and the market will remain sensitive to it. This week we will have higher inflation readings and retail sales, continuing the worry over interest rates. Cold weather or large drawdowns of distillate inventories this week could halt the slide in energy.
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