When Worse than Expected is Good News

November 6th, 2009 Posted in Uncategorized

Morning All

So when is worse than expected news good news?

Well before I got into that let me preface the answer by reporting this mornings much anticipated Employment Report from the Bureau of Labor. For the month of October, unemployment rose to 10.2% vs 9.9 expected. The real rate of unemployment is closer to 18/19%. Payrolls fell 190K. August was revised lower from 263K to 219K but how that's possible I'm not sure.

Bottom line - Unemployment is rising while those entitled to collect unemployment benefits are falling because they no long qualify. Not Good and much worse than expected despite this being a "lagging indicator".

That being said, how is all this good news???

Simply put, the companies that make up the US Stock Markets have cut a lot of "fat". Are they finished? Tough to say but if they continue to trim jobs and expenses they'll become even leaner and more efficient than they are now. So when the economic environment does improve, they'll have already been in a position to take advantage of future growth which translates in to what all financial analysts love ... earnings.

Short term speed bumps, ie market correction(s), do not remove the fact that US Equities are prime for a long term run.

As I write this ES Z9 traded down to 1053.50 just below it's weekly Pivot of 1055.53. The fact that we didn't trade through that by a greater amount leads me to believe, equities may rally despite this mornings negative report. Buying ES Z9 at or slightly above 1055.75 with 1053 Stop may be a good risk reward trade.

Longer term, I'll be interested to see where we close the week - above or below 1055.53 - to set the tone for next week.

If you have any questions or comments please contact me via email at ruria@manductrading.com or toll free at 866.312.4965 - Rob

Daily Pivots	11/5/09
EQUITIES	R2	R1	PIVOT	S1	S2
ES Z9	1066.08	1056.67	1049.08	1039.67	1032.08
YM Z9	10060.67	10008.33	9917.67	9865.33	9774.67
NQ Z9	1711.92	1699.58	1687.67	1675.33	1663.42
TF Z9	589.10	583.80	574.70	569.40	560.30
ENERGIES	R2	R1	PIVOT	S1	S2
QM Z9	81.90	81.15	80.33	79.58	78.75
QG Z9	4.95	4.84	4.78	4.67	4.61