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Jobless claims lower than expected

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This morning's jobless claims number shows first-time claims for unemployment fell by 14,000 in the week ending January 12 to 384,000, which is well below economist's estimates for a jobless claims level of 444,000. The four-week average, which smoothes out the more volatile weekly number, edged down to 411,000. Continuing claims for unemployment fell by 36,000 for the week ending January 5 to 3.47 million, the lowest level since September 27th. The four-week average fell by 52,250 to 3.59 million, the lowest level since October 13. This morning's labor data shows the labor market is stabilizing after the terrorist attacks of September 11th. Layoffs remain high, but have eased from the peak of 535,000 in the week of September 29.

Housing starts

Housing starts fell 3.4% to a 1.57 million-unit rate in December, which was just below estimates for 1.60 million units. Building permits rose 3.6% to 1.653 million, which was better than estimates of 1.560 million. This is a mixed report and should have little impact on broader market action. The housing starts number is a look backward at what was, while the building permits number is more of a forward looking number.

Citigroup reports

Dow component and financial behemoth Citigroup (NYSE:C) reported fourth-quarter earnings of $0.74, which was a penny better than Multex estimates of $0.73. Revenues rose 11.8% year-over-year to $21.97 billion vs. the $21.12 billion consensus. Citigroup said it lost $228 million before taxes in its fourth quarter on Enron dealings and $470 million because of the turmoil in Argentina.

Stock futures higher

Stock futures are posting gains this morning and indicating a higher open for stocks. S&P futures are trading higher by 8 points at 1,134. NASDAQ futures are trading up 25 points at 1,588 and Dow futures are higher by 85 points at 9,775.

Bullish percent changes

Yesterday's trading action has two of our bullish percent indicators turning more cautious as the NASDAQ-100 Bullish Percent ($BPNDX) fell to 50% and back into "bear confirmed" status. Just turning to "bull correction" is the S&P 500 Bullish Percent ($BPSPX) at 59% bullish. In essence, the light is flashing red for the NASDAQ-100, while the traffic light is now yellow for the S&P 500 and covered calls are now an appropriate strategy for those investors that prefer to hold long. Stops should be raised just under levels that should serve as support.

You can find information on the bullish percent and how to read this indicator in the "Bailey's Basics" section under the heading "Understanding Risk is Key."

Jeff Bailey
Senior Market Technician
Option Investor

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