BAM MARKET WRAP - THREE DOWN, ONE BIG ONE TO GO

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SO FAR SO GOOD

The markets surged today as the European Central Bank's Mario Draghi provided enough fodder for the markets to get excited about.  While the ECB did not announce anything much different than what had already been discussed, the markets obviously liked what they heard and were pleased to see the ECB taking some action to forestall the Euro Zone crisis.  It also didn't hurt that the ADP payroll report came in much hotter than expected.  ADP reported 201,000 new jobs.  Attention will now turn to tomorrow morning's government payroll report.  The ADP report can be a harbinger of the government number but can also be significantly different.  Last months numbers were very close but in June the ADP report came in at 172,000 versus the government number of 73,000.  Needless to say, expectations have been raised for tomorrow morning.  A reading equal to the ADP number would provide support and additional fuel for today's rally.  A disappointment in the government's number could result in giving back some of today's gains. 

The rally today forged new highs for the year and broke significant resistance so the bulls will look to fight hard to keep the gains.  The German Constitutional Court meets next week and could throw a wet blanket over Draghi's comments.  The Fed is also lurking next week and the good data would make another round of easing harder to justify.  Then again, better economic data would be the best of all worlds though Fed intervention would lead to more of a sugar-rush type of gain.  Tomorrow's report takes added importance with today's solid ADP report.  Conflicting data would only make the Fed's job harder (as if it wasn't hard enough).  We'll see what tomorrow brings and will post further updates as warranted by the markets or the economic news. 

HERE IT COMES

While trading volume in August was the lowest in 5 years, September promises much more volume and volatility.   Kids are back in school and traders have taken the last of their summer vacations.  Combine that with the huge market making events over the next few days and the stage is set for  a make or break moment in this enduring Summer rally.  The key dates over the next couple of weeks are:

• September 6 - The European Central Bank meets in Frankfurt, Germany.  The markets are expecting a few more details of Mario Draghi's promise of a couple of weeks ago to do whatever it takes to save the Euro.  We'll see.
• September 7 - The August Non Farm Payrolls and Unemployment report is released.  Strength or weakness here will be evaluated to determine the likelihood of further easing by the Federal Reserve.  A weak report will likely give the Fed cover to announce more easing.  A strong report will be good for the economy and will likely preclude Fed action.  Either of these two would produce positive results for the markets.  In this case, the worst case would be a jobs report that is neither too cold or too warm - the Fed probably would not act and the markets would not get excited about the future prospects.  
• September 12 - The German Constitutional Court meets to determine the constitutionality and legality of the European Stability Mechanism (ESM).  This will be a very significant conclusion as the ESM is key to the possibility of a European solution to their debt crisis.
• September 12-13 - The Federal Reserve meets to determine if the US economy is poor enough to justify another round of quantitative easing or some other fiscal stimulus.  The announcement will come the afternoon of the 13th and it is widely expected that the Fed will act.  Any disappointment will lead to a sell-off in the markets.

As you can see, the next two weeks hold the key to the remainder of this year (maybe longer).  Hopefully, we will begin to get some clarity over the next 10 days.  Hold on - things are about to get interesting!