Jobless Rate In Focus...

The Dow netted down 143 points last week as the higher than expected unemployment number spurred more selling than buying into the unemployment peak reversal scenario. It was evident last Friday when the market started out strong after the Job Report and then succumbed to selling by the end of the day. Jobless claims would certainly be the focus of the week as PPI and CPI could offer nothing of interest to investors by now. Next in line would be the Empire state index on Thursday as well (see economic calendar) as investors expect to still see worse numbers. So far, the January Effect does not seem to have materialized at all, why is that so? As I have explained in my previous post, the January Effect is an anomaly which has been popularized and taught for way too long (I mean, I studied that in school!) and arbitrageurs would already have expected it, stepped in and taken it away. On top of that, the January Effect is most evident only in primary bull markets, which most months are up anyways. That is why I do not personally make an entry relying solely on this basis.

On the longer term technical perspective, the Dow continues trading atop its monthly 200MA in an intermediate neutral trend. In fact, the Dow has been right along that level for about 3 months already. This shows that investors are finding value along this level and have halted the bears for now. This neutral trend could continue until something significant happens to warrant a breakout. For now, the market definitely has more upside potential than downside potential.