WASHINGTON, October 11, 2012 – Weekly jobless claims fell last week to the lowest point we’ve seen in awhile. That’s apparently all the market needed to leap from the depths of despair to a turbocharged opening this morning. Just a few minutes after the NYSE bell, the Dow is up a nifty 44, the left-for-dead NASDAQ is up 21, and the broader S&P 500 is up nearly 9. Compared to yesterday, this looks a lot like Lazarus “unexpectedly” rising from his grave.
Left in the dust, at least at the bell, were the morning’s substantial negatives. The balance of trade deficit widened and import prices are now reported as being higher than “expected.” But why would that be? Could it be that the dollar is getting cheaper and cheaper, thus raising the prices we pay for those imports?
In any event, this morning at least, the negatives don’t seem to matter. Headlines aside, though, the market has been ripe for at least a pocket rally here as we’ve been hinting at in our last two columns. All markets have been oversold, some grossly so. And when that happens, the pressure comes off by means of a sharp rally, which may not be of a very long duration.
In any event, after all the gloom and doom of the last several days, we’ll sit back and enjoy this sunny Indian Summer interlude on Wall Street and perhaps will utilize it to pick off a few profitable positions.
(UPDATING: 1:30 p.m. EDT. Surprise! Word has just leaked out that the jobless claims number underreports, perhaps substantially, the real number, accounting for much of the surprise drop in claims. It seems that a “large state” (California?) either underreported or provided an incomplete report of its numbers for the past week, thus distorting the much-ballyhooed initial report that gave markets a boost this morning. Not surprisingly, this morning’s strong rally has pulled back somewhat. We’ll see what happens after 2:15 p.m. EDT this afternoon, when either the buy or sell algos tend to come out in force.)
(UPDATE of UPDATE: We have tentative confirmation that the missing state was indeed California (smirk). Allegedly, the “incomplete” numbers were due to an incomplete report, which was due, allegedly, to an understaffed office. Seriously, how dumb do they think people are? As a result of the truth dribbling out this morning and afternoon, the big rally that was underway when we first wrote this piece fizzled, and the market closed slightly off. Upshot of this all probably is this: With the missing numbers, this week’s nationwide jobless claims figures may have notched a slight improvement, but not an impressive one. Will be interesting to see that happens to next week’s figures after these are revised. Funny that this happened on the eve of tonight’s VP debate. Just sayin’.)
For technicians, what’s called “market seasonality” is positive right now, as it usually is in the holiday-laden year-end period. Added to that, mid-October-early November is usually the time the “sell in May and go away” crowd returns to the market which helps drive it up. So, from an historical perspective, now or a couple of weeks from now would be a good time to go all-in.
On the other hand, the sell in May tactic didn’t work too well this year, as, until a couple of weeks ago, we were in the midst of a protracted summer-early fall rally which had to end. Further, until and unless the fiscal cliff and November U.S. elections are resolved, there’s a lot to worry about. So, like the summer-fall 2012 rally anomaly, we could also get a fall-winter downdraft anomaly, so let’s put today’s mildly irrational exuberance off to the side and see if it has any staying power.
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