Market Will Feed on Fed Hopes

Following Friday's brutal jobless report, investors will start discounting the Fed's anticipated easing next week

By Paul Cherney

The underlying trend for higher prices is running out of momentum, but it hasn't died yet.

The weakness in Friday's April Employment report has created well-founded expectations for a 50-basis-point rate cut by the Fed at the May 15th meeting. I think the markets are now in the process of discounting (moving higher in anticipation of) a 50-basis-point rate cut by the Fed. This should be the dominant theme next week thus creating a positive bias for equity prices. Once the rate cut comes, it could inspire some "sell on the news" profit-taking.

REMINDER: I would be very concerned about downside (next couple of weeks) if the Nasdaq were to close up on a day when the total share volume for the day was only about 1.66 billion shares.

The Nasdaq finished Friday's session in a test of resistance 2174-2233, the next layer of resistance is 2242-2356 with a focus of resistance 2253-2310. Immediate support remains 2169-2088. There is a focus of support 2137-2095.

The S&P 500 has immediate closing resistance in the 1253-1273 area. The next resistance is 1300-1341. Immediate support remains 1238-1223.

Cherney is Market Analyst for Standard & Poor's

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