In a year in which stock prices mostly have been driven by news rather than fundamentals, three things stood out last week. First, terrorism has taken on an unsettling new face — the stay-at-home mom down the street or your long-time co-worker at the plant — as the dark side of the exponential growth in social media rears its ugly head (with something much more sinister than porn sites or online bullying). Second, with the strong jobs report on Friday, the Federal Reserve seems to have all their ducks in a row to justify the first fed funds rate hike in nine years. And third, oil prices may remain far lower for far longer, with potentially more negative than positive impacts. Nevertheless, bulls continue to be comforted by seasonality and a strong technical picture (which is shaping up much like 2011). Thus, although our fundamentals-based sector rankings remain mostly neutral, the sector rotation model still reflects a bullish bias.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

Friday’s jobs reported was a big market mover. It showed that the U.S. economy created 211,000 jobs in November, beating expectations. September and October data was revised to show 35,000 more jobs than previously reported. And the official unemployment rate remained at 5% (i.e., what is generally considered to be full employment).

In response, U.S. stocks jumped more than 2% on Friday, with the Dow Jones blue chips and S&P 500 large caps posting their biggest one-day gains in three months. Nine of the ten S&P 500 business sectors climbed — all except Energy, which fell after OPEC failed to put a lid on its near-record output.

Oil is the proverbial Goldilocks market that needs to be not too hot and not too cold to work for all market segments. Too low creates instability in oil-exporting countries and threatens the health and livelihood of our domestic industry, with its high-paying jobs, and that’s where we are today, and apparently heading lower.

The dollar, gold, and base metals all showed nice gains, as well, on Friday. The 10-year Treasury yield closed Friday at 2.28% after dipping as low as 2.15% on Tuesday and as high as 2.35% on Thursday.

On September 21, I wrote, “The Fed’s decision to not raise the fed funds rate at this time was ultimately taken by the market as a no-confidence vote on our economic health, which just added to the fear and uncertainty that was already present. Rather than cheering the decision, market participants took the initial euphoric rally as a selling opportunity, and the proverbial wall of worry grew a bit higher.” But after Friday’s strong job’s report, which followed fairly definitive statements on Wednesday from Fed chair Janet Yellen about the economy being strong enough for an initial rate hike, market participants seemed just fine with the idea of the Fed giving a pro-confidence vote on our economic health in the form of a quarter-point fed funds hike.

Nevertheless, I will say again that I’ll believe it when I see it, given that the rest of the world continues with quant easing. But I must admit that the gap is narrowing, as we learned on Thursday that the ECB is injecting less than expected, which initiated Thursday’s selloff in stocks (Stoxx Europe 600 fell over 3%) and in the euro, causing that currency’s biggest single-day move in more than six years. As a result, yields on German 10-year bonds climbed 6 bps to above 0.70%, and the gap between 10-year U.S. and German bond yields tightened. Meanwhile, the highly predictive CME Group fed funds futures are predicting a 79% chance (and rising) of a hike on December 16.