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.
Jan 9 2014 Weekly Initial Unemployment Insurance Claims
The Jan 9 figures will be skewed a bit by the holiday numbers. A lot of analysts below that the numbers for this period are rarely worth worrying about. I disagree because they still show how good the holiday season was from both a shopping perspective (more shoppers means more employees needed particularly in retail) and from an earnings perspective (more part-time employees still means more cash in their pockets for buying everything from basics to discretionary).
The Weekly Initial Unemployment Insurance Claims that came in today for the past week (ending Jan 4) show that claims fell by 15,000. When compared to past holiday seasons, this was nothing to be thrilled with. The 15,000 reduction shows a somewhat mediocre performance especially in retail, so it is something to be aware of.
The Family Dollar Store earnings disappointment also shows that sales were somewhat lackluster. Macey’s letting so many employees go also shows the same. So perhaps the holiday numbers will not be as great as analysts expect.
Overall then the seasonally adjusted numbers came in at 330,000. This is still below the magic number of 350,000 where the market direction up starts to experience trouble so at present this is another plus for the bullishness for stocks.
Other areas to contemplate is the improvement in labor market in general. The payroll processor ADP reported 238,000 private-sector jobs were created in December which is the biggest jump in a year. Also the fact that these were private-sector and not public-sector is a real plus for the economy.
Meanwhile there are estimated to be about 1.29 million still receiving extended federal benefits as of the week ending Dec 21. However anyone receiving extended benefits that ended on Dec 31 are no longer receiving them as Congress failed to reauthorize them. The Democrats are pushing to renew the extended benefits program, but Republicans insist that spending cuts have to be found elsewhere in the US budget to offset the estimated $26 billion annual cost. The problem here is that this means $26 billion in annual payments that will not find its way back into the economy through purchases. So on one hand its good to see the government trying to save but on the other hand $26 billion may be a small price to pay to keep extra liquidity into the hands of consumers at the present time.
Not being an economist that’s about all I can say on that issue.
Friday’s Unemployment Numbers
This morning’s market jump on the Weekly Initial Unemployment Insurance Claims didn’t last long at all. Naturally such numbers may indicate that the non-farm payroll numbers are going to surprise to the upside which if they do could mean the Fed tapering can be moved ahead. Investors see this as a detriment to stock valuations. On the other hand if the numbers come in lower than expected this could delaying any further tapering which investors see as good for stocks.
Market Timing System and What To Take Away From The Numbers
The most important aspect of the Weekly Initial Unemployment Insurance Claims as a market timing system 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.
So while there is continuing weakness in stocks, and so far in January the rally from December seems to be over, the numbers suggest any serious correction is still not “in the cards”. This means I will be continuing Put Selling against stocks, especially those large caps I follow that take big dips such as AT&T did today and Family Dollar Stock among others.
Today’s number is again to the low side and well below the 350,000 threshold where stocks begin to have trouble. But at the same time these numbers could foreshadow stronger non-farm payrolls which investors are concerned about. So we are back to a mixed outlook until we see the numbers tomorrow.
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