Friday, December 02, 2011

Another semi-decent economic report: employment and the unemployment rate

We're clearly not back to "happy days are here again" yet, but today's monthly employment report for November showed a semi-decent rise in payroll employment and a modest decline in the unemployment rate. We still have a long way to go to get back to full employment and a fully healthy economy, but we aren't facing an imminent recession, yet.
 
It's a Friday after a week of big gains with a lot of uncertainty out there, so it would be natural for traders and short-term speculators to do some profit-taking ahead of a weekend when anything can happen. That said, if the bias is now really "risk on", we could see more of those lingering bears get caught up in another short squeeze and forced to buy to close out at least some of their remaining short positions.
 
So, we are back to roughly equal probability of two scenarios: 1) a pop at the open that hits the wall of "sell into any rally" and dwindles as the day goes on, or 2) a gradual building on gains as the day progresses. In both cases trendless volatility could be prevalent throughout the day, although that would be moderated if in fact "risk off" is the new trading bias among a majority of traders and short-term speculators.

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