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Friday, February 6, 2009

Approaching Depression Level Unemployment

The unemployment numbers are in, and the are ugly. 598,000 jobs were lost in January, and the unemployment rate is now 7.6%, I haven't seen U6, but I would imagine it is very close to 14%. That is perilously close to depression level unemployment. What's really frightening is the breakdown. 207,000 jobs lost in manufacturing, 111,000 in construction, 121,000 in services, 45,000 in retail, 28,000 in hospitalityand leisure. Gains were in education, health care, and government. Watch for the trends in education and health care reverse as state budgets implode in the near future. This is going to put more pressure on the Obama administration to "do something", which is probably what we don't need right now.

The market has so far responded with a rally, led by a bounce in the financials. Besides XLF, leading are XLB, XLK, XLI, and XLY. Lagging are XLU and XLE. The SPX is struggling with resistance at 857 as I write, and appears to be ready to drop.

The US dollar index appears to be weakening after another big ramp up off the 200dma. It is finding support now at the 50dma, and resistance at the trend line. If this can stabilize here it will go a long way toward stabilizing the markets.

The Yen appears to be eakening a bit. We have a double top formation, with a divergence in MACD, and a big drop yesterday. The inverse relationship between the yen and the SPX is not as strong as it was earlier this year, but is still there.

The Pound has been pounded, but appears to be gaining strength. The British financial system was on the verge of complete collapse (a la Iceland), but appears to be stabilizing and gaining a little strength.

VRTX is trying to break out, but is not getting much volume, and HOTT is hitting a new high after a recent pullback from a breakout. It appears to be getting decent volume. On the earnings list, NOA reported earnings and is up 10%, NGA is scheduled to report but I have no news on it.

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