Thursday, December 30, 2010

Market commentary for Dec. 30th, 2010

The Initial Jobless Claims number, released this morning, came in below 400K for the first time in several years at 388K. Expectations were for it to come in at 415K. But the previous week's data was revised upward as usual from 420K to 422K. It is not surprising to me that the number came in this week at 388K because last week was Christmas week. The real test of the numbers will come in 2 weeks. Many in Main St. media are saying that the big corporations are adding jobs, but they are hiring abroad, not here in the U.S.. But if you think about it, we only had a 4 day work week at best last week, so 400K jobless claims divided by 5 days would equal 80K a day. With only 4 days you would think it should have been less than the 380K. It should have been 320K.

Continuing Claims increased this week oddly enough from the last reading of 4.064 Million jobs to this week's reading of 4.128 Million jobs. Expectations were that the number would come in at 4.000 Million. That number is going in the wrong direction if one is looking for a lower Unemployment rate number next week.

The Futures market is down slightly on the Dow. European markets are all down currently and the Nikkei closed down last night. Today may signal the beginning of the market drop we have been expecting, although Volume will be light this week. Yesterday's Dow hit 11,621 for a new intraday high, but it closed down below 11,600 to 11,585. A down day today might accelerate the drop going into next week. We may still see a day or two to close at 11,620 but then a selloff will begin.

January should be choppy and a down month from current levels and that should set the expectations for the year, as the month of January is often cited as a determinant of how the Dow will end the year. If January is negative they say the year will have a loss. Key short term levels to watch is going below 11,460 on the Dow. We have completed the top of the right Shoulder of the Head and Shoulder pattern now, as seen on the chart below. As you can see from the sloping line under the head and Shoulder pattern where we are headed from here. It isn't pretty. So be cautious in your purchasing of stocks. Consider hedging with some short positions or ETF Shorts to protect your profits. Taking profits here aren't that bad an option either.

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