Oil, and stocks rose, the dollar fell, in reaction to generally positive data from the U.S. Initial jobless claims fell by 6000, pending home sales rose by 5.2%, which, combined with the positive manufacturing numbers earlier in the week, led to a strong upward reaction in the S&P that was further boosted by some weakness in the Treasury market, leading some of the money that left that sector back to equities.

In spite of the bullish tone, so far, the crucial determinant for trends, and prices will be the NFP data tomorrow. A disappointment there will quickly lead to a reversal of most the gains registered this week, while the opposite case may help to sustain the market at around current levels for the rest of this month. It is also possible that last month's weak NFP data will see a strong upward revision, since the NFP sum of states diverged by a much greater margin from the regular release than what is usual for that month.

• Initial jobless claims come at 472,000 vs. analyst average of 475,000

  Markets appear to have been boosted by the improvement in jobless claims data this week even though the number itself can hardly be regarded as positive. A weekly claim above 400.000 is far from being enough to bring down the unemployment rate, and that remaining high, one cannot expect to see consumer optimism rising significantly. Before August 2007, for instance, initial claims would regularly come below 350.000, and a number above 350,000 would be regarded as a very bad result for the economy. Things have changed however, but only if you are prepared to buy what the Fed, and some managers are willing to sell. These high numbers must be made to come down soon, otherwise it is not very meaningful to speak of any recovery on a general basis. Industries may improve profitability through productivity gains (that is, after all, what Japan has been doing, for a long time), but experience shows that without a broad based increase in either wages, or demand, it is not possible to sustain a long-term improvement in growth performance.

Gold rises above $1250

We are anticipating a powerful bubble phase for the gold market in the next two three years without an exact price target. Instead of a price target, we await the normalization of monetary policy around the globe, a clear parabolic price pattern (which doesn't exist yet), or certain unlikely events that will alter the fundamentals of the gold market drastically (such as new laws about ownership, coordinated sales by central banks, an international agreement), or all of the above, before we become bearish on gold. Until then, we are bullish.

The gold market has once again behaved in its own strage way by rising at a time when it should be falling. After all, we have been observing gold rise as stocks fall, and confidence erodes, but now that the latter improve, one must expect gold to give up some of its gains. Not so today, as gold rose above 1250, and held there, although weakly. It is hard to make predictions about short term events in this market since it is very volatile, and at times counter-intuitive. Still, our main scenario expects a growth shock to be bearish for gold, since margin calls on leveraged players will force some gold sales, which tend to get amplified as speculative players pile in to increase downside momentum. Yet in the long run, as long as the present monetary policy stance remains in place, there is little that can stop the advance of gold from completing the last leg of its bubble formation, and reaching some surprisingly huigh levels. $2000 is the first obstacle in the race, since it corresponds to the all-time high of the early 80s.

Today's rise was partly explained by some commentators as being related to a E.U. Plan to limit short sales of government debt and stocks to limit volatility. Since this will reduce the flexibility of these assets, some of the money will be moved to gold as there are no comparable regulations in the market. But it is hard to explain the rise in this way, since there is no shortage of liquid, profitable stock markets in the world, and it is hard to see why a stock or bond trader would leave E.U. stocks or bonds and purchase gold instead of short-selling another volatile market like China, Brazil, or Colombia, for example.

In sum, we have a bullish day today, where just about everything that would be expected to rally in a bull market did rally, and safe havens depreciated. The NFP release tomorrow is undoubtedly central to the monthly outlook, and we'll wait to see the release before reaching a conclusion about the direction of the market in the next few weeks.