Everyday seems to be another day for Wall Street, as all the major averages pile up gains, moving ever closer to the upper level of the six-month trading range. At 12.30, today, the SPDR S&P 500 (NYSEARCA:SPY) was up 0.94 percent; The POWERSHARES QQQ TRUST, SERIES 1 (NASDAQ:QQQ) was up 1.23 percent; and the FINANCIAL SELECT SECTOR SPDR FUND (NYSEARCA:XLF) was up 1.70 percent.
The problem, however, is that the market has approached these levels before, only to back down — heading to the lower levels of the range. So, one question dominates traders’ minds: What will it take to push equity markets above the trading range?
- A strong employment report. Though many economic indicators confirm that the economic recovery is on a firm ground, indicators are still lagging, raising doubts as to whether the recovery is sustainable. So a dose of strong employment numbers like the the ADP Report we did get today can erase these doubts, giving the market the needed boost to get above its trading range.
- A resolution to the European debt crisis. For more than a year, European debt concerns have been a source of anxiety for traders, especially for traders in financial stocks, as they bring back memories of the subprime crisis that caused them hefty losses. So some sort of resolution of the crisis could set off a relief rally.
- A resolution of U.S. debt crisis. Though not as large and as urgent, US debt concerns have been another source of anxiety, as the August 2nd debt ceiling deadline approaches. So a resolution to this crisis could set off its own relief rally.
- A robust earnings season. Earning seasons can make or break markets. As the market looks well past the Great Recession, when corporate earnings took a big hit, earnings surprise on the upside become increasingly difficult. Yet an upside surprise by bellwether stocks, the likes of General Electric (NYSE:GE), Microsoft (NASDAQ:MSFT), Apple Computer (NASDAQ:AAPL), IBM (NYSE:IBM) and Intel (NASDAQ:INTC) will set off its own rally.
Disclosure: I am long GE, INTC, QQQ.