As many investors know who follow various market timing systems, I review the market timing system of using the weekly USA Initial Unemployment Insurance Claims every Thursday for some idea as to market direction. To understand this full market timing system you can read this article.
The report out this morning on USA Initial Unemployment Insurance Claims shows that the numbers remains stubbornly high with claims up last week to 372,000 marking a jump of 10,000. But claims from last week were revised higher by 12,000 as a number of states did not report and were guessed at. This means the average USA Initial Unemployment Insurance Claims for 2012 were 372,000.
Market Timing System Chart of USA Initial Unemployment Insurance Claims
The chart above shows that since the start of stimulus by the Federal Reserve, the Initial Unemployment Insurance Claims has dropped until last year. The spike up is from Hurricane Sandy. Prior to 2008, the USA Initial Unemployment Insurance Claims were always below 350,000. In 2012 the 350,000 barrier was only slightly broken twice and later each time those figures were revised back above 350,000.
Using This Market Timing System
As a market timing system, watch for the report which comes out most Thursdays, to show any sign of a trend lower. Despite the Fed’s further stimulus measures unemployment is staying above the 350,000 threshold and needs to fall below it repeatedly in order for the stock markets to convincingly move higher. That is not to say that the stock markets cannot move higher, but to stay up they need better unemployment numbers.
If the numbers start to rise, pull back on Put Selling and consider in the money covered calls. This is what I will be doing throughout the year. In the money covered calls often can provide 5% to around 10% protection. If the USA Initial Unemployment Insurance Claims rise back above 390,000 watch for the markets to stall and/or pullback. If the USA Initial Unemployment Insurance Claims rise above 400,000, watch for the markets to pullback stronger which will be an excellent opportunity for SPY PUT options to be bought. I will definitely be doing my Spy Puts Hedge trades when I notice any numbers reaching 400,000.
Market Timing System USA Initial Unemployment Insurance Claims Summary
Remember nothing is perfect and no market timing system is foolproof but over the years I have found the USA Initial Unemployment Insurance Claims Market Timing System to be one of the better systems to follow to know when to pull back from Put Selling and when to increase my risk to possible assignment by Put Selling more.