Thursday, November 02, 2006

Friday's Jobs' Report Looms Large

We could spend a few minutes telling you about the news of the day for Thursday, but that would mean we would be telling you that 3Q preliminary productivity was unchanged as opposed to the +1.0% expected or that September factory orders were up less than expected or that unit labor costs were higher than expected. There doesn’t seem to be any point to tell you all of this Bearish news because the market just isn’t interested in such things. Besides, Friday morning brings the big number we have all been waiting for, the jobs’ report.

The jobs’ report is expected to show about 125K jobs were created in October while the unemployment rate is supposed to remain level at 4.6%. This report seems to be ill timed due to the election next week and the position the market is in this week. The fact is that these are government numbers and who knows what seasonal or other adjustments are being made to torture them. We aren’t trying to say that the numbers are manipulated but there is the possibility that the report shouldn’t be, shall we say, detrimental to the election.

The stock market will do what it must do in spite of the news. The news is just there to help us get better prices for the action that we are trying to trade. In this context, we like to think that the high price of the month occurs near the jobs’ report. This theory has come under severe strain the last several months but it is not down and out. We think Friday holds the possibility of a reversal given the right circumstances.

As we see it, the market has gone through a metamorphosis (the term morphed came from this very word, imagine that) the last week or so changing from an imitation butterfly bull market back into the caterpillar bear market that it really is. Well, maybe the verdict isn’t in yet, but the picture has certainly changed.

We see that the over bought condition has abated meaning either that the market is about to surge again or that the urgent buying is now over. Time will tell and hopefully Friday morning will give us some good clues to the near term direction. If we do get numbers the market likes, we may see a nice surge at the opening bell giving a very nice opportunity in our minds to sell.

In our last post we talked about the need for the market to “fill” in those vertical moves. Well, it didn’t do that today but Friday may actually show us that fill. Or, if conditions don’t improve we could see the most natural drop in the course of early trading. We think Friday’s market is very ripe with possibilities. You may want to pay extra close attention to the action. We will be back on Sunday evening for another post covering Friday’s action. Friday should be interesting.

Dow Industrials: 12,018.54 -12.48
VIX: 11.42
QQQQ: 42.04
RYVNX: 18.60
RYAIX: 22.44
RYCWX: 37.81
TLT: 89.59
BEGBX: 13.85

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