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Late selloff into today's jobs report

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Stocks gave back Wednesday's gains yesterday with one swift late day selloff. The whats and whys don't really matter to me, but I'm sure that some of it had to do with not wanting to hold stocks into this morning's release of the November employment report.



Some employment reports are more important than others. This one could be big. We all know that the economy is a mess. The question is, just how bad is it? The estimates for the jobs report is for a loss of, get this, 325,000 jobs.



If the actual number can come in anywhere close, the market may shrug it off as it may already been priced in. A number in the 200,000's would be a very nice surprise and could kick off a decent rally. But if the number moves over 400,000, there could be some trouble.

The unemployment rate has been steadily moving higher for the last couple of years, and if we hit the estimates of 6.8%, we'll be looking at a number not seen in over 15-years.



The scary thing about these current estimates is that they are "typical" recession numbers so far. The early 1990's and 2001 recessions saw 300K job losses and unemployment rates hitting 6% and 7%. But the current economic situation seems to be much worse than the "typical" recession, so I would expect these numbers to get a lot worse before they get better.

The S&P 500 could not get above the overhead resistance yesterday. It also stayed within the high and low points we are watching. As we mentioned yesterday, the 896 and 815 levels are the ones we are keeping an eye on, and whichever gets penetrated first could dictate the intermediate-term direction of the market, although the jobs report could taint that theory.


Chart provided courtesy of www.decisionpoint.com

If pressed for a guess, I would have to say the jobs report could push the S&P 500 below the 815 level, and possibly down toward the bottom of the declining trading channel (725 area). That guess is based purely on the charts, the trend and the indicators only. I have no clue as to what type of jobs report we will get. I am not even sure I will trust the number they release since they tend to make huge revisions down the road. So, it may not just be the November jobs report figure, but also if they happen to revise the October number, which had been reported as a loss of 240,000 jobs.

One thing to remember, and we have seen it many times: Like an FOMC interest rate meeting, these jobs reports can move the indices wildly, but there is a tendency for the market to correct itself in the coming days. That is, if the market really dives today, we could see a reversal later in the day, or early next week. Same is true if we get a strong rally. It could reverse down pretty quickly.

That type of reversal will throw a wrench in our analysis - if the 896 or 815 levels are penetrated but the S&P corrects back within the trading range. I would say the closing price is the more important number.

That's all for today. Thanks for reading. Have a great weekend!

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