It is quite clear that the market wants good reports from the earnings announcements that begin this week. We make that judgment based on Friday’s weak close, despite a solid week of some of best economic news of the year that culminated with the drop in unemployment to 7.8% from the expected 8.2%.

With all the recent central bank actions (e.g., the Fed’s unlimited QE3, the ECB’s Outright Monetary Transactions, and the Bank of Japan’s ongoing initiatives), the expectation of infinite liquidity is now baked into stock prices. So, further movement will have to come from new catalysts, like good old-fashioned earnings growth.

Sabrient's chief market strategist, David Brown, was quoted in Myra P. Saefong's Market Snapshot article on Market Watch: Dow ends lower as focus shifts to earnings, Spain

"'Premarket bullishness' in equities, which had opened mostly higher, was 'likely due to expectations that Spain was ready to sign off on receiving bailout money as early as this weekend, but Spanish Prime Minister Mariano Rajoy denied that later in the day, reigniting investor concern about the region,' said David Brown, chief market strategist at Sabrient Systems. 'That state of uncertainty, of course, is exactly what the market hates.'"

Given the market’s performance over the last month, we feel that investors should consider reducing the more speculative portions of their portfolio.

With about six weeks to go until the U.S. Presidential election, we enter the critical month of October in which Romney will be using all means necessary to move the swing states like Ohio, Florida, and Colorado from blue to red. The latest polls show Obama leading in these states, but everyone—especially investors—knows that it can all change during this final stretch of debates, campaigning, interviews, and commercials.

After two consecutive weeks of more than 200 basis points of growth in S&P 500 market prices, resulting from general enthusiasm over the stimulus decisions of the ECB, Fed, and Japanese Central Bank, the market took profits relatively quietly last week. Last week’s economic reports were generally flat.

See David's comments on Spain's bailout request and the expected U.S. GDP number this week in the MarketWatch article titled "U.S. housing data, Spain in spotlight next week."

Portfolio managers returning from their summer holidays have apparently liked what they’ve heard from the central banks. Although total volume remains modest, U.S. stock indexes have hit new highs. The S&P 500 finally busted out of its 3-month-long bullish rising channel.

The Fed has enacted QE3 with an indefinite time deadline. Europe continues to make progress after Draghi’s bond buying announcement and Chancellor Merkel’s reaffirmation. The market has noticed and responded with a strong upward movement in each of the past two weeks.  

Despite last Friday’s disappointing jobs report, stocks are staying strong. The S&P 500 hit yet another new high on Wednesday—its highest level since January 2008, while the Nasdaq is at a level not seen since toppling from its “irrational exuberance” days of late-2000 as the Internet bubble was bursting. The ECB seems to be getting a workable plan together to support the eurozone banking system and sovereign debt.