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Futures hit lower as jobless rate jumps to 6%

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Stocks were looking at a marginally higher open until this morning's payroll data was released, which disappointed bulls.

The Labor Department reported that the domestic economy eliminated 40,000 jobs in November as the unemployment rate rose to a larger than expected 6%, which was higher than economists forecast for 33,000 job losses and unemployment rate of 5.8%.

The jobless rate matches the April 2002 rate and is the highest since it reached 6.1% in July of 1994.

On the bright side, October's payrolls were revised from a 5,000- job loss to a 6,000 gain.

November's job losses were concentrated in manufacturing, which were down 45,000 and retail, which fell 39,000, while construction was also soft. Broader services and government showed job increases.

Average hours worked, overtime hours and factory workweek were all unchanged in November, which depicted lackluster demand and higher productivity like that reported on Wednesday.

The jobs data has found a very defensive reaction from the market as Treasuries find buying across the maturities. The December 10-year futures contract (ty02z) 114'060 +0.86 has jumped back above it 50-day SMA for the first time in two week, while the benchmark 10-year YIELD ($TNX.X) drops sharply to 3.983% and sits right on its rounding higher 50-day SMA and upward trend from the October 9th low.

S&P futures, which had been marginally higher before the release of this morning's economic data were in the green, but have turned sharply lower and are currently off 14.50 points at 894, which is well below the psychological 900 support level. NASDAQ futures (nd02z) are down 23 points at 1,033, while Dow futures (dj02z) were hit hard and currently trade down 130 points at 8,510.

After Wednesdays trading, the S&P 100 Bullish % ($BPOEX) from www.stockcharts.com reversed into "bear alert" status and yesterday's action had the also narrow NASDAQ-100 Bullish % ($BPNDX) reversing lower into "bull correction" status. As noted in prior commentary, both of these bullish % indicators had reached the more overbought levels above 70%, with the NASDAQ-100 Bullish % having soared to as high as 82% earlier this week, which had bulls carrying a greater degree of risk. This morning's jobs data now looks to see an unwinding of that risk with lower stock prices and bulls should be implementing defensive action by taking profits if not having done so in recent weeks.

Ask the Analyst.... Yesterday, I received about 20 questions regarding "what expiration and what strike I would buy in a specific stock or index. I can't answer each one here, but am thinking an article this weekend is warranted.

If subscribers can "beat" the 20-question level (there may be more as I can't even review each e-mail I get) with a different topic, I'd like to give subscribers an idea of just how powerful the point and figure charting system can be with strike and expiration in mind.

For your "Ask the Analyst" topics, please send me an e-mail at jeff@sungrp.com with "Ask the Analyst" in the subject line of your e-mail!

I'd like to get some from PremierInvestor.com subscribers too! Maybe I could also tie in some stock specific thoughts as to how even a stock trader looks to view time in relation to a short- term or swing-trade type of style. For instance, if you're a stock trader that like to only hold a position for 5 days or so, if you buy a stock at $20 and it moves up $3 in two days when you were targeting a $4 move, does it make sense to just sit there and do nothing until your 5-day period is up?

Jeff Bailey

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