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  • Rev Shark:

    Not Trusting This Market

    By Rev Shark
    RealMoney.com Contributor
    2/3/2006 8:57 AM EST
    Click here for more stories by Rev Shark   

    "Character, not circumstances, makes the man."

    -- Booker T. Washington.

    Character is not a major issue for the stock market when there are no major problems and difficulties to confront. When the market is running and the buyers are anxious, the true character of the market and the likelihood that it will stand steadfast when faced with challenges are hard to determine.

    It is only when challenges and difficulties arise that we learn the true character of the market. Good markets can handle problems. They can fight back from a few days of weakness, negative news and profit taking. Markets with poor character are unable to shrug off issues; they can't overcome a bad day like yesterday and their efforts to the upside are limited.

    The current market is about to be tested. The jobs report is out and the number of new jobs added is below consensus estimates but the unemployment rate is the lowest since 2001 at 4.7%. Average earnings came in a tad higher than expected at a increase of 0.4% vs 0.3%.

    There are some slight inflationary pressures in those numbers and the market reaction is negative. This market is very concerned about inflation and even slight hints of it are going to be an issue. We have some character issues here and that means we have to sit back and wait for this to play out.

    The market is at a juncture now where something more than a minor pullback could develop. We are past the peak of an earning seasons -- which wasn't really good anyways -- energy prices have stayed strong, Iran may become an increasingly difficult issue, and the FOMC has indicated it is leaving the door open to more rate hikes.

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