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Unemployment Claims As Bullish As They Seem?

 September 10, 2010 11:20 AM

The Labor Department reported Thursday morning that new claims for unemployment dropped a seasonally adjusted 27,000 to 451,000.  Unexpected bullish news, right?  The markets immediately gapped-up on this information as the bulls found good reason to buy.  Unexpected positive news is almost always met with a bullish move north as it's rarely priced in.  However, a useful tidbit of information about that shockingly large drop came out after the gap-up.  Bloomberg reported that nine states didn't file claims data to the Labor Department in Washington because of the Labor Day holiday earlier this week.  California and Virginia estimated their figures and the U.S. government estimated the other seven.  Coincidence in the large drop or not?  We'll see when the next revision comes out but usually those revisions fail to make headlines as we are already focusing on future claims.  This has been a great cover-up method for a long time.

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In other important news Thursday, the Shanghai Composite lost 1.4% Wednesday night over concerns that China will take steps to tighten credit. Usually this is news that the markets would turn bearish on but, it was disregarded today.  Are we going to ignore the bad news now and simply hold our nose and buy?  Markets tend to trend in one direction longer than most everyone thinks it will so, we could see more low volume moves north before we start to remember the economy is not nearly as strong as we hoped it would be by now.  If the Republicans can get in office, this can create a standoff between Republicans and Democrats that has been known to be bullish for the markets.  John Boehner vs. Barack Obama could be the new Newt Gingrich vs. Bill Clinton and the markets are likely to have a more bullish sentiment from it.  That potential setup might be the strongest case for the bulls at the moment.

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Technically speaking, the markets are still in a trading range between the 200-day simple moving average and the 50-day simple moving average in the S&P 500.  I was hopeful the markets would run up closer to the 1015 resistance level but, we barely broke the 1010 resistance.   Due to this, I was unable to add to my short hedges at the favorable levels I wanted to.  After the gap-up to open, we trended south until a final hour push brought us slightly up to end the day.

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