Why Isn't Jobs Coming Back?
The Dow closed up marginally by almost 64 points today as some investors started reallocating out of bonds and back into equities.
Fundamental Analysis
Bond yields rose across the board today as investors reallocate out of the extremely low bond yield and back into equities. Investor sentiments were dampened in early trading as jobless claims failed to beat expectations, raising concerns about tomorrow's Job report (see Stock Market Calendar). Why isn't jobs coming back in a big way now that everyone's talking about economic recovery for so long? Well, the truth is, economic recovery does not mean economic expansion! The recovery process is a long one which goes from economic numbers slowing their decline to economic numbers going stagnant and then to economic numbers heading back up. After the numbers are up and business starts recovering in the real economy will we see jobs come back. The US economy is still in a state of repair, not growth, which is why it is going to take a while more before people starts to feel the pressure ease in their pockets and their lives. However, there is no doubt that the world economy is on the warpath to recovery and the worst is over (until the next crisis). Investors are also cautious going into the labor day long weekend, which is why trading volume has been way below average these two days as well. Consensus is calling for unemployment rate to hit a high of 9.6% tomorrow.
Technical Analysis
On the technical front, this is nothing more than just another sideways day for the Dow. Yes, every big down or up day will be followed with a few sideways day before deciding which direction to breakout. In such technical setups, the inclination would be to breakout in the direction of the big candle, which is downwards in this case. In fact, the Dow looks like it is repeating what it did back in 18 June. Yes, history do repeat itself and that is one of the important corner stones of technical analysis. Short term bearish momentum continue to rise and investors continue to be cautious. Odds continue to favor a downside breakout like it did back in June.
For now, the Dow remains in all out bull trend.
Fundamental Analysis
Bond yields rose across the board today as investors reallocate out of the extremely low bond yield and back into equities. Investor sentiments were dampened in early trading as jobless claims failed to beat expectations, raising concerns about tomorrow's Job report (see Stock Market Calendar). Why isn't jobs coming back in a big way now that everyone's talking about economic recovery for so long? Well, the truth is, economic recovery does not mean economic expansion! The recovery process is a long one which goes from economic numbers slowing their decline to economic numbers going stagnant and then to economic numbers heading back up. After the numbers are up and business starts recovering in the real economy will we see jobs come back. The US economy is still in a state of repair, not growth, which is why it is going to take a while more before people starts to feel the pressure ease in their pockets and their lives. However, there is no doubt that the world economy is on the warpath to recovery and the worst is over (until the next crisis). Investors are also cautious going into the labor day long weekend, which is why trading volume has been way below average these two days as well. Consensus is calling for unemployment rate to hit a high of 9.6% tomorrow.
Technical Analysis
On the technical front, this is nothing more than just another sideways day for the Dow. Yes, every big down or up day will be followed with a few sideways day before deciding which direction to breakout. In such technical setups, the inclination would be to breakout in the direction of the big candle, which is downwards in this case. In fact, the Dow looks like it is repeating what it did back in 18 June. Yes, history do repeat itself and that is one of the important corner stones of technical analysis. Short term bearish momentum continue to rise and investors continue to be cautious. Odds continue to favor a downside breakout like it did back in June.
For now, the Dow remains in all out bull trend.
Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!
posted by Jason Ng at 5:40 PM
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