The ‘monthly strength period’, the last two trading days of each month, and the first four days of the following month, was due to end on Thursday, and seemed to.
And next week is the week before the month’s options expirations week, and the week before tends to be negative.
And the market has been up for 3 straight weeks. As a result, as noted on Thursday’s post, AAII investor sentiment spiked higher into its dangerous zone this week, with bulls above 50 at 52.7%, and bears under 20, at just 15.1%, virtually no one expecting anything but higher prices.
Then there is the short-term overbought condition above 50-day moving averages.
If I’m right will it be just another brief pullback, or the beginning of the real correction that didn’t materialize in October?
Has the jobs report lost its mojo?
For years I have referred to the Labor Department’s monthly jobs report as ‘The Big One’. Or at least I have done so since the market topped out the first time in 2000.
As the economy slowed and for quite awhile after both the 2001 recession and the 2007-2009 recession, jobs disappeared each month, and each report was watched for signs of jobs bottoming. And as they recovered, they were watched just as closely, since the reports were volatile, sometimes gains, sometimes losses, then as recoveries continued; sometimes large job gains, sometimes small gains.
Because the reports are volatile, often subject to revisions, and impossible to predict, for 15 years they most often came in with a surprise in one direction or the other. And as a result of the exaggerated focus on the reports, egged on by CNBC, those surprises almost always resulted in a one-to three day triple-digit move by the Dow in one direction or the other. (Thus my description of the report as ‘the big one’).
There were always points within the reports for debate. Jobs were up but the participation rate was not, or jobs were disappointing but the unemployment rate fell (the government obviously falsified the numbers said Donald Trump and Jack Welch).
The other side of the pattern was that whichever was the direction of the initial knee-jerk reaction was almost always reversed over the subsequent few days, and the market forgot about it, going back to whatever was its focus before the report.
But reports the last few months, even if a surprise, did not have the same effect on the market. Perhaps a move in one direction for a couple of hours, and then a reversal, but that was about it.
Most of it is that the jobs recovery has settled into a steady pace, with only minor variations from expectations.
Yesterday’s report was that only 214,000 new jobs were created in October, missing the consensus forecast of 240,000, but the unemployment rate dipped down from 5.9% to 5.8%. As is being reported, the economy has now added 200,000 or more jobs for nine straight months, for the first time since 1995, 20 years ago.
The market had little reaction, the Dow showing little volatility through the day, and closing up 19 points, or 0.1%.
I guess it’s time to retire my description of the jobs report as ‘the big-one’. It’s become just another boring report indicating the economic recovery continues.
To read my weekend newspaper column click here: Healthy Returns from the Healthcare Sector
Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!
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