Heavy Weight Week Again...

It's the first week of the month once again and time once again for the most heavy weight of all economic numbers; the ISM index and Jobs Report (see economic calendar).

In my humble opinion, we should see all these numbers turn in pretty nasty with unemployment rate hitting a new high. If these numbers do not result in the final capitulation that I had been talking about, then the stock market could really have found a bottom at this 8500 level. This is because the stock market moves ahead of the economy and if really nasty numbers do not take the market down any further, then these numbers could already have been factored into the market itself and are now beginning to price in a recovery. Indeed, in the last crisis (2001 - 2003), stock market recovered about 4 months before the unemployment number started turning down again (July 2003). In that 4 months, unemployment actually went higher and then peaked in June 2003. Could that be the case right now? Its really hard to say but the signs are there. What I can say for sure is this; the Worst is over in the stock market but the Worst numbers are yet to come for the real economy.

On the technical front, the Dow went back into its short term neutral trend after a brief bearish fake out last week. What does short term neutral trends indicate? It indicates that the market is about to decide on its next short to intermediate direction through a breakout. With the primary bear trend and a short term resistance indicated by the top of the bearish channel in place, a bullish breakout is going to take a lot of effort to happen.

If you wish to take advantage of that breakout without having to speculate on its direction, you might want to consider a delta neutral options strategy or a multi-directional strategy such as the Ride The Flow System.