Market comments for Dec. 2nd.

My goodness, yesterday's market move of 250 points on the Dow based upon the following news:
1. Ireland still afloat, but concerns over Portugal and Spain's debt lingers.
2. The Chicago PMI came in at 62.5 versus and expectation of 59.6
3. Consumer Confidence for Nov. came in at 54.1 versus an expectation of 52.0
4. Challenger job cuts down -3.3% y/y
5. Construction spending was 0.7% for October versus expectations of -0.5%, but was exactly the same as last month.
6. Unit Labor Costs were down -0.1% versus an expectation of -0.4%, even though last reading was -0.1%
7. The ISM index came in for Nov. at 56.6 versus an expectation of 56.5 and a prior reading of 56.9
8. Crude Inventories came in at 1.07 M versus a prior reading of 1.03

Now I ask you, does this news warrant that much of a market movement? I am waiting to see Initial jobless Claims numbers in a few minutes. Last week the number was 407K. The expectation is for the number to be 422K. So think about this for a moment, if last week was 407K and the trend has been coming down, why would the "expectations" be for 422K? I'll tell you, so that the market can have beat the expectation and the jobless number will come in under 422K. You just watch. So any number between 407 and 422 will be cheered and the market shall rise as "things are improving out there". Please shop!! I will add the actual data in 10 minutes but wanted to post this first.

UPDATE: 5:35am PST

Well it's going to be interesting to see the spin today because the actual Initial Jobless Claims came in at 437K, higher than the estimate. That's an increase of 26K they are saying over last reading. Continuing Claims are at 4.27 Million jobs, not counting all those not included of course, which comes to about another 13 Million people. Have a great day because you should know that they are not going to extend Unemployment benefits for the people who have been out of work for several years. I call it the Bah Humbug Christmas spirit this season.

And here is the headline after the data came out, fresh of the wires, so to speak:

Futures Up Despite Jobless Claims Rise
By Melinda Peer 12/02/10 - 08:48 AM EST

NEW YORK (TheStreet) -- Stock futures were looking to extend the previous session's rally on Thursday even as initial jobless claims climbed to 436,000 as markets anticipated the European Central Bank would enact measures to contain eurozone weakness.

European market economic data update: They are hurting too!

According to news reports today, Unemployment rose to 9.4 percent in June, the highest since 1999. More than 3 million people have joined the euro region’s jobless rolls in the last year, and the Organization for Economic Cooperation and Development expects the unemployment rate to reach 12 percent in 2010. The highest rate was in Spain, which came in at an unbelievable 18.1% rate. Prices in the euro region dropped 0.6 percent from a year earlier, the most since the data were first compiled in 1996.

What does this mean for the U.S.? It means it will be difficult for Europe, a large trading partner for us, to purchase U.S. products, thus keeping our revenues pressured for U.S. Corporations and earnings going forward. We are counting now so much more on China than we ever have been, a dangerous move and a critical partner of our future economic stability, that we have increased our risk for recovery. And on that note, U.S. stock futures erased gains after the government said personal consumption slumped more than forecast last quarter.

Where's the stock market going next? Try wearing this story for size, down! (UPDATE)

I have not posted anything on the market since Saturday's post. In that piece I said the following, "The 200-day moving average is still trending downward. This tells me to hold off. It’s not yet time to jump back into the markets. This is not the time to buy & hold… not yet. Believe me, I’m watching this indicator closely." At that time the Dow was at 8,574 and the Nasdaq was at 1739. Today the market closed with the Dow at 8,285 and the Nasdaq closed at 1664. While the Dow dropped 185 points today, the volume was less than yesterdays. Same was true for the Nasdaq Composite Index volume. I would have liked to see a bit higher volume but it just means the drive lower will be slow and not fast.

TZA gained $3.67/share today to close at $30.84 for a 13.5% gain for the day. FAZ gained $0.75/share to close at $6.17 for a 13.9% gain. That was a nice recovery for both Triple Shorts. The Put to Call ratio closed today at 0.89, not anywhere near the extreme highs we had for the past year. There's plenty of room for it to go higher. I hope you now believe what I have maintained for a while through difficult times for Short positions. I know your question so here's the answer. The market should go lower, in my opinion. If you want to know the slope of the downtrend just look at the slope of the 200 day Moving average line for the Dow and the S&P 500. The Indexes should stay below the line. On the Dow, the line now crosses the axis a little below 9,000. On the S&P 500, the line crosses the axis at 950 and on the Nasdaq, it crosses the axis at 1735. It will be the Nasdaq Index to watch. Since we closed today at 1664 we are just below it and have stayed below it the past 5 days. Before that, we were above it for 3 days. So the pullback is being led by the Nasdaq. Watch that index during the day to get a sense if we are going to go above it and stay there. I just don't think that is going to happen any time soon.

Another piece of info I learned today was that when the top 19 largest U.S. banks were Stress Tests, the oversees branches of these banks were not included in the test. Considering Europe is in worse shape than the US, it seems that the Stress Test results most likely would have been worse. This would have meant much more money would need to be raised by each of the banks failing the tests. When I say that Europe is in worse shape consider this Spain currently has 17% Unemployment. And consider this, many of the banks requiring to raise Capital are doing it all at the same time. This will dry up money for new investments and cause additional pressure on the banking Index and on stocks in general. This all points to the market going down.

Let me answer another question you might have. Is it too late to get in on the Shorts like TZA and FAZ? Simply put, no!

UPDATE: 6:00AM PST

Looking for more clues as to market direction this morning and Gold is now at $925/ounce. It is still going up. I think Gold will continue to go up as the market pulls back. Unemployment claims for the week rose to 637,000, an increase of 32,000 from the previous week. This shows that we have not leveled off in unemployment as many had hoped. Continuing claims, also reported this morning, are at the highest level since 1950, 6.56 Million unemployed. One other number worth noting is the 3 Month LIBOR rate which is currently at 0.854, this is the lowest I have seen this number in many years. It is the rate Banks lend to each other.

Also, Asian markets sold off last night and European markets are mostly down this morning. While our Futures point to a neutral open, I believe we will go lower for the day. Art Cashin of UBS Warburg when asked this morning about market direction he said we need to hold the S&P500 at 870 or above. If we break through that level it's then 862 and if we break through that level we go to 820. Art also said it needed to be watched carefully as we go lower, because of the difficulty in predicting how low it is going to go.