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Zero Jobs Created.


We saw the bruising debt crisis debate? We saw the ultimate US credit downgrade? What do you think it did to the mind set of consumers and employers? It spooked them. In a fragile financial economy any such negative stimulus to the senses does one thing only: It freezes the decision making. Both consumers and employers froze in their tracks. Specially employers who got spooked and stopped hiring. They thought the world was ending and the US will never recover.


Our turtle went back into his shell. Employers retreated back to safety net as the threat of another financial disaster started looking real. There was danger everywhere, at least they thought. Don’t hire ! They had no confidence in the leadership in Washington. President Obama’s leadership just collapsed and his ratings plummeted down to 38 percent. The whole country fell backwards another step in the confidence game. That’s why you see consumer confidence at two years lows. The fragile economy got rocked hard. Thus you see no jobs added.


The market has been going up last four session from a “W”shaped bottom formed a few days ago. The rise has seen sharp rallies to the upsides. Its been quick and dirty. Some of you are thinking why are we sitting on the sidelines missing the actions ? Not quite that way. We have been careful with these bear market rallies. They show up during bear markets and most recently in 2008. The market gets oversold, everyone throws in the towel and calls it quit. Sentiment gets very negative. Everyone starts feeling hurt. That is when the market usually reverses. It reverses hard. Because there are lots of shorts and they get nicked and they start covering their position. There is not enough room to exit and that further pushes the market higher with low volumes.

If the volumes are heavy than buyers are stepping in with the shorts and the rally has legs. This rally lacked those characteristics. This is probably what happened here in the last week and this week. A short term bear market rally when the fundamentals were all going the other way.

Yes there were some bright spots like consumer spending rose, manufacturing activity expanded and other minor things. But the real crux of things was to appear on Friday and it was the unemployment report. The grandaddy of all reports. It can move markets either way. A good report can push the markets to 200 points on heavy volumes and bad report can push it down 300 points. So its a gamble. Many traders were apprehensive and so uncertain they took the money off the table on Thursday and went home flat, so as to speak. The market fell 120 point on Dow on Thursday. That is the reason market is not down so hard today on this awful unemployment report. This report should have kicked the market another 500 points on DOW its so awful.


We need at least 250,000 Jobs added every month to barely keep up with the unemployment rate. This is what economist predict that we need to added at least 250,000 jobs each month to gain control on the unemployment numbers. The nation’s jobless rate is not going to go down at any levels below that. August’s unemployment report is merely a function of loss of confidence and the political vacuum created in Washington. The President has failed to imbibe confidence so far. The economic recovery seems out of his range.

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