U.S. Jobless Claims Lower than Expected

By: Donald_W_Dony

The U.S. Unemployment rate just posted a new 45-year low. That is good news for the S&P 500.

The number of Americans filing for unemployment benefits fell by 1 thousand to 222 thousand in the week ending June 2. This occurred after the previous week's revised level of 223 thousand and below the market's expectations

The market was looking for a reading of 228 thousand.

The industries of profession, business, information services and health care hired the most whereas the manufacturing sector was one of very few sectors that lost positions.

The impact of a new low in unemployment is also good news for the stock market.

The U.S. Unemployment rate and the S&P 500 trend in opposite directions. As the chart indicates, these two key indexes have a tight contradictory movement.

Bottom line: The steady decline in the U.S. Unemployment rate is promising news for the stock market.

The main takeaway is that as long as unemployment remains low the stock market should continue to trend upward.

The transition towards rising unemployment is not immediately negative for the S&P 500. Patterns over the past 60 years have shown that the U.S. jobless rate normally bottoms-out for six to 12 months before starting to increase. This "grace period" allows for investors to have a pre-warning of a likely end to the business cycle and of a new downward trend in the stock market.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2018 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present.  He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.   

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms.  He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

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