Ouch.
Unemployment rate claimed at 6.5%, with 240,000 jobs lost in October.
The ugly however, is that revisions were even more horrible, with 284,000 now lost in September and 127,000 in August.
Bet on that 240,000 being revised upward. It will be.
U6, which is my favored count of unemployed (this includes "marginally attached" workers and those who are employed part time for economic reasons (that is, not by choice)) is now at 11.1%, up from 7.9% last year at this time. While this is not in "Depression" territory the trend is especially bad, the revisions are stunning, and we haven't even had an official recession declared yet. With more than one in ten people who want a full-time job unable to get and hold one along with the rest of the economic outlook things are definitely getting worse and the only light I see in the tunnel is an oncoming bullet train.
On a technical basis the market is in extremely fragile territory. 897 is a key Fibonacci level on the SPX - we bounced off it yesterday afternoon - literally to the point. If this level fails today then the local bottom in the 825 level is almost certain to be retested, and given that from an Elliott Wave perspective this looks awfully "Wave 5"ish once that break occurs confidence is going to rise substantially that we'll go there - producing a likely cascade of selling.
The key is whether 825 holds. Below there is 768, which is the 2002/03 lows, and that is a truly critical level for the market.
Ultimately, given the underlying economics, I believe that level will fail, but the odds are that it does not fail this time. That is, my highest-probability scenario is that we either bounce here (off 897) or we head down and bounce somewhere between 825 and 768ish. That likely gives us a monster relief rally (see the "rip your face off" move after Bear Stearns), and then we head south again - this time with little chance that 768 on the SPX holds - as the reality of the recession and unemployment takes corporate earnings into the trashcan.
Without earnings prices will collapse, and the ugly is that we have tremendous overcapacity in our economy - still - as a consequence of the credit bubble.
We cannot get out of this until the bad debt is forced from the system via defaults. Changing who holds the bad debt does not restore productive capacity, it instead papers over losses and does exactly nothing to restore employment and productive capacity.
Those are the keys folks - and until and unless our President-Elect, along with Congress, stops trying to cover business failures with "TARP"s, withdrawing the fraudulent cover that excess leverage and bogus balance sheets have wrought on our economy and markets, we have no chance of the market - or economy - staging a meaningful recovery.
http://market-ticker.denninger.net/
