Still Held Hostage By The Fed, Markets Are Holding On

On the inflation front, there has been a never-ending flood of bad news since the January jobs data, which was released on February 3.

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The message has remained consistent over the past week, with the job market remaining robust and inflation rising once more in some circumstances, according to the January personal consumption expenditures price report, the prices paid component of the ISM Manufacturing report, Thursday's initial jobless claims, and the final unit labor costs measure.

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The Friday report's ISM Services and the prices paid component won't likely provide much solace.

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Amazingly, we are currently flat for the week going into Friday trade and are just 4% off the recent highs from early January. But there has been a great deal of psychological harm done.

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Once more, money is leaving the stock market.

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According to Trade Algo, global stock funds experienced net withdrawals of $13 billion in the week ending March 1, the largest amount since January 4.

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Poor Investor Sentiment

According to the American Association of Individual Investors' AAII Sentiment Survey, positive sentiment was exceptionally low while pessimistic sentiment was unusually high.

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• Positive: 23.4% (average over time: 37.5%)

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• Bearish: 44.8% (Average in History: 31.0%)

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• Negative: 31.8% (historical average: 31.5%); neutral

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Alec Young, a chief investment strategist at MapSignals, told me that the market was in a difficult situation.

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"It picks pockets. It just pours down a little bit each day; it's not exaggerated, he continued. That clearly isn't working, and people are losing billions of dollars attempting to buy this market. We believed it was safe to buy equities after January, but it's not.

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With the uncertainty surrounding the fundamentals, technical analysis has taken center stage in the minds of many investors.

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Young Observes That The S&P 500

Notwithstanding yesterday's late-day surge, which helped it retain its 200-day moving average (3,940), there is little certainty that this will continue.

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I think 3,800 [on the S&P 500] is buyable, he declared.

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Bottom line: The Fed and inflation continue to hold the markets captive.

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Keith Banks, vice chair and chief investment officer of Bank of America's pension and benefits plan, stated on "Squawk Box" on Friday morning, "We are all living in the Fed's universe.

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"We anticipate three additional raises. The Fed turn has been badly sought after by the market, according to Banks. As long as that doesn't happen, "We think it's going to chop around."