Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

An Encouraging Week For Stock Market Investors!

Stock-Markets / Stock Markets 2010 Dec 04, 2010 - 05:15 AM GMT

By: Sy_Harding

Stock-Markets

Best Financial Markets Analysis ArticleAfter a strong rally in September and October, the stock market topped out short-term four weeks ago, with the Dow then declining 4% in just seven days.

In the process it broke below key short-term support levels that market technicians watch, and entered a very narrow sideways trading range, locked between 11,000 on the downside and 11,200 on the upside that it couldn’t seem to break out of in either direction.


Then came this dizzying week.

Early in the week it looked like the market might be breaking out of the range to the downside. The Dow dropped below 11,000 by as much as 70 points in intraday trading on both Monday and Tuesday. Both days it recovered before the market closed, but to levels just fractionally above 11,000, leaving traders still worried.

A break out of the range to the downside would be seen as a negative development, and that possibility seemed justified given the dire reports from Europe indicating a domino effect is potentially underway in its debt crisis, and reports from China of more moves by the Chinese government to significantly slow its globally important economy (in an effort to prevent asset bubbles and ward off inflation).

However, on Wednesday the market instead reversed and surged to the upside, the Dow gaining 249 points, its biggest one day gain since September 1. On Thursday it surged up again, the Dow gaining another 106 points, breaking it clearly out of the previous narrow trading range to the upside, just two days after it had appeared to be breaking out to the downside.

The dramatic move to the upside also seemed justified, since the bad news from Europe and China had dropped out of the headlines, replaced by very positive U.S. economic reports, including gains in consumer confidence, manufacturing activity reports, retail sales, auto sales, pending home sales, and so on.

But the week’s drama was still not over.

The improving economic reports of the last couple of months had economists convinced that the big report of the week, the Labor Department’s employment report for November, would show that 155,000 new jobs were created in November.

When the much anticipated report was released Friday morning it was a huge disappointment, showing that only 39,000 jobs were created in November. The economy needs roughly 150,000 new jobs a month just to keep up with the growing population, as more young people join the workforce.

Perhaps a bigger surprise and disappointment was that the already high unemployment rate ticked up to 9.8% from the previous 9.6%.

The report threw a curve at economists.

The dismal employment situation, and what to do about it, has been the main focus of economic and political debates, particularly since the summer’s temporary scare that the economy might be slipping back into recession. One of the most common statements in those debates has been that the economy cannot recover until more jobs are created. And on the surface that seems to make sense.

Yet history shows that employment is a lagging indicator, one of the last areas to begin improving in an economic recovery. And that makes more sense. Employers do not begin hiring additional workers until well after the economy has recovered enough that they can no longer handle improving business by simply increasing the hours of their current employees and hiring temporary workers.

So the dismal employment report should not overshadow the string of very positive economic reports of the last couple of months; gains in consumer confidence, manufacturing activity, retail sales, auto sales, pending home sales, and so on. They are the leading indicators that must improve for quite some time before employment finally begins to turn the corner.

Not that everything is wonderful in those leading areas. Investing is never worry-free.

The main leading indicators in both directions, into recessions and back out, are almost always housing and autos. That makes sense since they are the two largest purchases consumers make, usually with most of the purchase price financed, significantly multiplying the economic effect of the cash down payment, while increased home construction and auto production results in significant new business for the long stream of suppliers to those industries.

Only one of those economic engines, auto sales, seems to be functioning well so far, with the housing industry still mired in the mud. Nor have the market’s worries earlier in the week regarding Europe’s debt crisis and the intention of China to slow its economy, gone away.

So still plenty of potential bumps in the road.

But an encouraging and dramatic two-day upside reversal from the downside break that threatened the first two days of the week.

Sy Harding is president of Asset Management Research Corp, publishers of the financial website www.StreetSmartReport.com, and the free daily market blog, www.SyHardingblog.com.

© 2010 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in