(By Rich Bieglmeier) Last week was surprising to iStock. When stocks got crushed on the bad, 69k jobs number, the markets took a hit because of real, hard news. However, all last week's gains came on the back of hopes and rumors of more Wall Street welfare i.e. free digital dollars and euros.
However, Ben Bernanke and his Beige Book put some water on the QE3 embers with reports of an economy supposedly improving in April and May. The up-tick means the Fed will not ease until the economy really starts sucking wind. That might not be too long if you think about China's interest rate cut. The rate reduction is an admission that the Chinese economy is slowing faster than anticipated.
The US can't possibly decouple from a recession in Europe and China.
Additionally, Spain came begging for $120 billion after Friday's market close. On the weekend, their political leadership warned the citizens of tougher times ahead. Investors might wish to pay heed to the warnings, remember Greece!
While last week's rally turned out to be one of the strongest weeks of 2012, it did little to improve the technical state of the indexes. In fact, as the market went higher and higher, volume withered and withered. That's just not a sign of confidence or commitment; rather, it is a sleight of hand; watch these shiny gains, but don't pay attention to their sandy foundation.
We would have a little more appreciation if the indexes at least managed to start a new trend by topping May's highs, but that didn't happen either. What did happen, however, is that the NASDAQ, Dow and S&P all closed up on their 26-day averages, which is not uncommon in a counter rally within a longer-term down-trend.
That's not to say stocks won't go higher this week, too. Like last week, the indexes could move higher, maybe to the respective 50-day averages. This is especially true if the Street believes the world is on the path to saving Spain, at least for now.
However, the volume picture tells iStock the current rally will be more like generic batteries than ENERGIZERs. You can't tell the difference at first, but the real thing is far more durable, doesn't disappoint, and costs less money in the long run.