Investors Are Wise To Remain Flexible: The bearish spin on unemployment is obvious. The bullish spin is weak employment means low interest rates which is good for asset prices. Another possible spin by the bulls is "sell the rumor (weak employment) and buy the news (Friday's report)". Ultimately, it matters how the market (in the collective minds of participants) chooses to spin it, not how we at CCM choose to spin it. Nor does it matter how any one individual, one columnist, one market guru, one money manager, one firm, or one talking head chooses to spin it. The market sets asset prices, not individuals or gurus. You'll hear a lot of "the highest unemployment rate in 26 years" in the next 72 hours. Keep in mind, 26 years ago was 1983, another period of negative investor sentiment. Sentiment is a contrary indicator – markets do well when people are pessimistic. Stock market performance from 1983 to 2000 is shown below to stress the importance of keeping an open mind as you read all the gloom and doom articles in the coming days. An open mind means open to bullish and bearish outcomes, despite negative sentiment. An open mind, means remaining flexible enough to react to bullish or bearish conditions as new information comes to light, both via the news cycle and the market's reaction to the news.
On Friday, before the open, the futures on the S&P are at 1,056. Therefore, a trade in the next few days between 1,045 and 1,072 may offer little in the way of new insight. Moves outside these levels, especially on strong volume, would get our attention. We remain in a bull market, but the bears still have a hold on the correction, which means we need to be open to both bullish and bearish outcomes in the short-to-intermediate term. A cycle low comes in near the end of November - just something to keep in mind should the S&P take out 1,045, and more importantly 1,038.
The charts below show slight bullish slant in Thursday's strong stock market breadth.
