On Friday we got the unemployment data that I have been previewing this week.  Here is the first paragraph from the report.

The unemployment rate fell from 10.0 to 9.7 percent in January, and nonfarm
payroll employment was essentially unchanged (-20,000), the U.S. Bureau of
Labor Statistics reported today. Employment fell in construction and in
transportation and warehousing, while temporary help services and retail
trade added jobs.

If you just read that paragraph and that is all you heard on unemployement, you are probably scratching your head. I got the same question all day.  How can we lose 20,000 jobs in a month and see the unemployment rate go down 0.3%?  Well, it is due to all the revisions that are made to the data.  The short answer is, the population shank and so did the labor force.  I would like to point out a small table the BLS includes at the back of the report.  This is Table A-15 for those of you scoring at home.

I know the table is small, but if you click on it, it will open a new window.  I want to point out the last line item on the table, U-6.  U-6 is Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.  I call this the ‘real’ unemployment rate.  This came in at 18% for January not seasonally adjusted and 16.5% seasonally adjusted.  I think this number gives you a better idea of the unemployment rate today.

Continue reading »

From the the FDIC

1^st American State Bank of Minnesota, Hancock, Minnesota was closed today by the Minnesota Department of Commerce, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Community Development Bank, FSB, Ogema, Minnesota, to assume all of the deposits of 1^st American State Bank of Minnesota.

As of December 31, 2009, 1^st American State Bank of Minnesota had approximately $18.2 million in total assets and $16.3 million in total deposits. Community Development Bank, FSB did not pay the FDIC a premium to assume all of the deposits of 1^st American State Bank of Minnesota. In addition to assuming all of the deposits, Community Development Bank, FSB agreed to purchase essentially all of the failed bank’s assets.

• The markets got beat up today.  Here are the highlights from IBD.

The market’s correction deepened Thursday as worries spread about the debt-burdened economies of Portugal, Greece and Spain. Stocks also suffered from a disappointing jobs report, while ignoring better-than-expected news on factory orders and productivity. The NYSE composite careened 3.6% lower, the S&P 500 3.1%, the Nasdaq 3.0% and the Dow 2.6% Volume was up across the board

• Right now the selling is leaving no stone unturned.  They are going after all sectors (oil, gold, commodities, financials, healthcare, and technology)  Here is a snapshot of how all the stocks in the S&P500 fared today.
• Only 33% of NASDAQ stocks are above their 50 day moving average right now, and only 52% are above their 200 day moving average.  This means slim picking for stocks to buy right now.  I will re-iterate some one my comments from Tuesday.

I prefer indices/stock that live above their 50 day moving averages.  This is the reason I am on the sidelines right now.

I would point out the volume patterns of late.  Big volume down days with light volume up days.

The former leaders of this market still have broken charts.  I think we still need more time for repair, but charts will set-up in the future.  The best position right now is cash.

• It looks as if the major indices want to test the 200 day moving average.  That would mean approximately a 500 point decline in the DJIA, 100 points in the NASDAQ, and 50 points in the S&P500.  Obviously, I do not think this will happen in one day, but the market feels very heavy right now.  The 200 day moving average would be the next major support level.
• All eyes will be on the jobs number tomorrow morning.  Let’s see how the market reacts to this number.  Here is a preview from yesterday’s post.

Happy hunting!

I will present a link from Bloomberg that will help get you prepared for the employment numbers.  I am doing this because the Bureau of Labor Statistics announced in October 2009, that their final revision will be issued Friday.

In accordance with usual practice, the U.S. Bureau of Labor Statistics is announcing its preliminary estimates of the upcoming annual benchmark revision to the establishment survey employment series. The final benchmark revision will be issued on February 5, 2010, with the publication of the January 2010 Employment Situation news release.

Each year, the Current Employment Statistics (CES) survey employment estimates are benchmarked to comprehensive counts of employment for the month of March. These counts are derived from state unemployment insurance tax records that nearly all employers are required to file. For national CES employment series, the annual benchmark revisions over the last 10 years have averaged plus or minus two-tenths of one percent of total nonfarm employment. The preliminary estimate of the benchmark revision indicates a downward adjustment to March 2009 total nonfarm employment of 824,000 (0.6 percent).

Click here for a some light reading to keep you up to speed on the revisions the government makes on the unemployment data.  We know what the current revision will be, the more frightening prospect is that the next historical adjustment, due out in early 2011, will be even larger, at least 990,000. This means that the government has overrepresented running payroll data by over 1.8 million jobs over the past 20 months.

The market has experienced a few up days since my last post.  This bounce is starting to alleviate the extreme over sold conditions.  The NASDAQ McClellan Oscillator finished up 13 points today to close at a –27.  This index has gone from a –63 to a –27 in just two days.  If we get another two days of this action, the market will move to neutral from extremely oversold.  Let’s look at the charts of the NASDAQ and S&P500.

The blue trend line I have drawn on this chart encompassed almost 7 months of support.  The longer the trend line the more significant it is, and this break probably means it is more than a regular pullback.  It looks as if the NASDAQ wants to rally into the 50 day moving average (~2,228).  I prefer indices/stock that live above their 50 day moving averages.  This is the reason I am on the sidelines right now.

Continue reading »