A few days ago, I posted a picture of initial jobless claims on top of the S&P 500 to show you the correlation of jobs and stock prices.  You’ll hear from some “pundits” that jobs don’t matter.  We’re a service economy now and manufacturing here in the states is never coming back.  And while I believe that, my job is to figure out what makes stock prices go up or down.  Job growth is one of the many components that affect stock prices.  Today, we got another confirmation that jobs do matter. The change in non-farm payrolls figure came out at 7:30 a.m. CST.  The number (which will be revised) came out at a -125,000.  This was a little better than estimates, but once again this number is going in the wrong direction.

I know it’s hard to believe government numbers and we know they change over time but the point is this:  If you believe we’ll have more jobs and a robust economy, you buy stocks.  If you believe we’ll have stabilization like we did in the mid 2000s where jobs were created even at a slow pace, you buy stocks.  If you think unemployment is going to stay over 10% and increase, then you avoid stocks.  This is a longer-term indicator and while things look very bearish based on the above graph, I think we are setting up for a tradable rally in the next few days.  As always, we have to monitor the strength to determine whether or not it should be shorted or not.  We often get rallies into holidays that are somewhat patriotic.  This year, it may be the opposite.  I think the rally comes after the holiday.

Short-term (starting in the next few days) – Bullish
Medium-term – Bullish
Long-term – Bearish