As regular readers of FullyInformed know, I consider the Weekly Initial Unemployment Insurance Claims to be one of the best Market Timing System methods. It has a long proven track record. This Market Timing System can be used to spot pressure building to the downside for a major correction simply by the numbers themselves. You can read the entire article on that market timing system method through this link.

Dec 5 2013 Weekly Initial Unemployment Insurance Claims

Today’s release of the latest number of new claims for unemployment benefits fell last week, to a seasonally adjusted 298,000. The previous week was revised upward by 5000. Analysts had estimated that the number for this week would show a rise to around 325,000.  Meanwhile the four-week moving average for new claims fell 10,750 to 322,250.

While the Labor Department indicated that part of the better numbers could be due to the Thanksgiving week and the numbers of new employees.

Friday’s Unemployment Numbers

The big numbers on Friday of the non-farm payroll numbers are expected to show improvements of around 180,000 and a drop in the unemployment rate to 7.2 percent. Many analysts are now pointing to today’s Weekly Initial Unemployment Insurance Claims numbers as further evidence that the economy is gaining momentum. Many now believe the employment numbers for Friday will meet estimates of 180,000 new jobs created.

Market Timing System and What To Take Away From The  Numbers

All the number talking aside the most important aspect is the cut-off point where increasing unemployment numbers can lead to a serious correction in stocks and where decreasing numbers continue to support stocks.

Today’s number is down to the low side and well below the 350,000 threshold where stocks begin to have trouble. That said, the number also has investors concerned that the Federal Reserve could begin tapering the Quantitative Easing in December, ahead of the next round of debt ceiling talks. This has investors on edge and today’s market direction movement lower is a sign of that concern.

Market Direction Is Still Up

While stocks have never had so much liquidity pumped in over such a long period of time (now 5 years), the Weekly Initial Unemployment Insurance Claims market timing system has never failed to produce the early warnings when the market is in trouble. In my opinion as an investor that means that should the Fed start even a small amount of tightening and the market direction move substantially lower, it will be a trading opportunity and not the beginning of a more serious corrective action.

With the Weekly Initial Unemployment Insurance Claims staying below 350,000, there is the real possibility that the Fed could begin to scale back the amount of liquidity in the system, but overall this market timing system clearly indicates that there is no market direction collapse yet ahead for stocks.

Transportation Index Is Up

The last point to mention is that the Dow Transportation Index continues to rise and has been rising throughout the present period of weakness. It is rare when the Dow Transports and Weekly Initial Unemployment Insurance Claims are wrong at the same time together. Because of this I am continuing to seek additional Put Selling opportunities among stocks while the market direction remains weak.

One final point to reflect on. Today’s claims report showed that the number of people still receiving benefits under regular state programs after an initial week of aid is now at the lowest level since December 2007.

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