Stock Market Analysis

Sunday, December 06, 2009

Unemployment Rate Reverses

US unemployment rate reverses from 10.2% down to 10% and beat consensus of 10.2%. In fact, Nonfarm payroll change beat consensus by a mile, turning in at -11k against consensus of -100k. So, what does this tell us? That the economic recovery is real. All we need now is one more month of unemployment rate drop to confirm that this is not another "fake-out". The stock market moves ahead of the real economy and much of these has already been priced into the year long rally so far. This is probably why we did not see a breakout on this news last Friday. There was extremely heavy buying followed by extremely heavy selling, which resulted in a sideways day with extremely high volume, much like a quadruple witching day. The Dow continued to move largely short term neutral last week, closing the week up by a marginal 0.77%.

Yes, the charts tell us that the market is still under considerable pressure and that most likely much of these optimism has been priced in and profit taking may be underway to close accounts for the year before January. This is also the longest short term neutral trend the Dow has been in since this new leg up begun in July. Short term momentum looks balanced at the moment with no significant inclination to upside or downside.

For now, the Dow remains in short term neutral trend within an intermediate and long term bull trend.

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