One thing we can say about the stock market lately is that it has not been boring. However, I can probably sum things up for you in one sentence. Investors are ignoring bad news and continue to buy stocks due to stronger fundamentals in the U.S. and global recovery. On a short-term basis stocks are in rebound mode and are likely to continue higher thanks to end of quarter window dressing.

Worries over Japan have subsided substantially but the country continues to struggle with one of its damaged nuclear reactors and radiation levels have been rising. The Japanese have quietly been evacuating more and more people away from the power plant. Meanwhile worries over Europe's debt problems seem to be fading even as Portugal slips closer and closer to a debt default. Portugal's government has not been able to pass the needed austerity measures and there is a growing expectation the country will need a bailout. Fortunately, investors seem to be shrugging this off given that the EU has been prepping for another bailout with its rescue funds. Yields on debt for the PIIGS countries has been rising, suggesting some unease by investors but that hasn't stopped a bounce in the European stock markets.

Back at home in the U.S. the strength of our economic recovery is showing a few bruises. The durable goods orders came in weaker than expected. The University of Michigan consumer sentiment figures slipped lower than estimated. Existing home sales and prices continue to fall. New home sales have plunged to the lowest level on record. The only positive headline was the final Q4 GDP estimate getting revised higher from +2.8% to +3.1% growth.

Commodity prices remain a concern. Oil is the first one that comes to mind. The conflict in Libya will likely disrupt that country's oil exports for months to come and oil has rallied back over $100 a barrel. Furthermore there is bickering among NATO allies over what exactly the no-fly zone over Libya really means. Do they or don't they target Gaddafi? How much support do they provide the rebels? Who's in charge of the Libyan offensive? Rumors that Al-Qaeda fighters have joined the resistance against Gaddafi probably makes Western nations uneasy.

Elsewhere in the middle east violence continues to rise. Demonstrations and protests in Syria, Yemen, and Bahrain are growing bloody. Everyone is extremely worried that if this revolution hits Saudi Arabia we could be in serious trouble since Saudi is the world's swing oil producer. At the moment the Saudi population has been pacified with billions in handouts. If the price of precious metals is any indication then investors are definitely nervous. Silver futures rallied to a new 30-year high at $38.18 an ounce. Gold futures hit a new all-time high at $1,448.60 an ounce on an intraday basis.

Looking at the U.S. markets the rebound in stocks has been impressive. The S&P 500 is up +5% off its mid March lows near 1,250. The close over resistance near 1,300 and its 50-dma is bullish. Yet +5% in two weeks is a bit much and stocks may have gone from oversold to overbought. The S&P 500 looks like it may have broken the trendline of lower highs (see chart) but I wouldn't be surprised to see this index dip back and retest support near the 1300 level again. Overhead there is resistance near 1330 and the February highs near 1344 - might as well call it 1350.

Daily chart of the S&P 500 index:

The NASDAQ composite has also seen a +5% rebound from its March lows. The close over the 2700 level is bullish but the index seems to be stalling near its 50-dma and its trend of lower highs (see chart). On a positive note many of the big cap tech stocks that led the NASDAQ higher for much of 2010 appear to have reversed higher this past week. There is plenty of disagreement over how much Japan's disaster will impact today's "just in time" supply chains but from the look of this bounce in stocks the optimists seem to be winning.

Daily chart of the NASDAQ Composite index:

Micron's (MU) bullish earnings report a couple of days ago fueled a strong bounce in the semiconductor sector. While the group seems to be bouncing there is definitely overhead resistance for the SOX index. A failed rally in the SOX might be an early warning signal for the NASDAQ.

Daily chart of the SOX semiconductor index:

The small cap Russell 2000 index has produced a +6% rebound off its March lows. The 830 level was resistance in late February and early March and that's where the rally stalled on Friday. If this rally continues the $RUT is not that far away from new three-year highs. A breakout past the 840 level could herald a new leg higher. However, odds are good the $RUT will see some profit taking first before we see it rally past the 840 level. Then again we don't know how strong the end of quarter window dressing might be.

Daily chart of the IWM Russell 2000 ETF:

Weekly chart of the IWM Russell 2000 ETF:

This coming week has a lot of economic reports. The big headlines will probably come from the consumer confidence numbers, ADP employment report, the Chicago PMI, ISM index, and the nonfarm payrolls (jobs) report for March. The confidence numbers come out on March 29th. ADP is out on the 30th. The Jobs report is out on Friday, April 1st. Economists are estimating +185,000 new jobs with private payrolls rising +203,000.

Looking at the big picture I don't see any changes from my comments last week. The end of QE2 in June and Spain and Portugal's debt auctions in June could cause a lot of turmoil for the stock market. Prior to that the Q1 earnings season that begins in mid April will either provide more fuel for the rally to begin its next leg higher or it could sap the strength of this bull market if corporate guidance is too cautious. On a short-term basis we have four trading days left before the first quarter ends on March 31st. Odds are stocks will continue to drift higher throughout the remainder of the month and into the first few days of April.

- James