Thursday, November 6, 2008

Jobless Rate Soars - Fade the Rally

Jobless rate increasesI woke up to find that the market is rallying because we lost only 240,000 jobs in the month of October.  The market reacted by going up 200 points in the Dow.

240,000 jobs is an awful number.  6.5% unemployment is high when compared to where we have been in the last decade.  There are now 10 million people who are considered unemployed.  This is the same number of people in the state of Michigan.  The scary part, it really is going to get worse.  Like I said in my last post, there are more and more employers announcing layoffs.  So this will easily get worse before it gets better. I don't expect depression like numbers, but I do expect unemployment to continue to rise through the end of the year.

The play here, fade the rally.  For those who don't understand it, it basically means you should start selling your stock into rallies because the general direction is down.  You are getting a short term bounce, so you should use it to your advantage.  There is one caveat here.  I think the market could easily rally depending what comes out of Obama's economic summit.  If he came out and gave news that was very investor friendly, like he would extend the capital gains rate past the 2010 expiration, I can see the market having a violent rally upwards.  These types of moves are why most investors should stay out of this market.  It just isn't a market that amateurs should be messing around with.


  1. Just for options, I've been looking on job banks. The grim truth is there are very few jobs out there right now.

  2. It's going to get worse. I give this slump another 8 months.

  3. It's bad everywhere. More layoffs at my company.