As is usually the case on the first Friday of every month, today we're going to delve into this morning's employment numbers for February and see if we can get a grip on what's really happening on the jobs front. We've also got a reader question we want to answer along with a quick look at the market after today's strong selling (yes, things changed for the worst... maybe). But, since it's the big news for the day, we'll get the ball rolling with a look at the unemployment data you didn't hear as much about. The Complete Employment Snapshot Just to give credit where it's due, John Monroe over at the Elite Opportunity took a look at some of our current employment trends as well in that newsletter today. Some of it was information we're going to look at in a moment, but he also had a deeper look at the stark divergence between the U-6 and the U-3 numbers that we won't be able to get to in this newsletter. SCN Elite Opportunity Free Alerts Get premium select stock picks via email and mobile text alerts from our SmallCap Network Elite Opportunity Team. It's 100% FREE! No strings attached and no credit card required. Click here to sign-up today! If you keep close tabs on the unemployment trend, you'll know why the U-3 and the U-6 matter, and more important, you know why the difference between the two matter. You could arguably make the case that the difference between the two IS the key to checking the economy's temperature. I honestly wish we had a chance to get into those details with you today, but time and room just don't permit it. Trust me though... if you're looking for an even deeper understanding of economic mechanics, the EO is serving them up on a regular basis. But I digress. Let's get to the updates of the data we usually look at. First and foremost, the unemployment rate fell more than expected, to 5.5%, with 295,000 new jobs created in February. The charts speak for themselves. Just for a little more perspective, here are the grand totals of the number of employed people, the number of officially unemployed people, and the number of people who aren't currently being counted as unemployed but do actually want a job. The "want a job" figure has been rising pretty steadily for the last six months, even as the unemployed total has been falling. We are making net progress, but it may not be as strong as it appears. The most important data nuggets buried in all these numbers are the labor force participation rate and the employed/population ratio, which basically give us a bottom-line figure for how active our labor market is. Although the relative number of people officially in the labor force is still frustratingly low at 62.8%, the number of people with jobs continues to trend higher. The two data sets are admittedly a little at odds. At least part of the explanation lies in the U-3/U-6 discussion John had with Elite Opportunity members today. Broadly speaking though, we're seeing improvements on the participation front, even if some of that improvement is just in the form of not losing ground. Anyway, while I don't feel comfortable giving you all the detailed research John and his team did today for Friday's Elite Opportunity newsletter, I think we can safely give you one of his key take-aways from today's edition of the EO, Johns says (and I agree)... "So what's the takeaway to all of this? I think it goes without saying from an economic perspective, things aren't bad right now, but they're definitely not as good as our current administration is leading us to believe. However, I've said enough times, based on my experience, the markets are always right until they are proven wrong. Meaning, on a long-term basis the trend is still our bullish friend." You Asked - We Answered On the off-chance you've not heard, we encourage all of you to ask question and give us feedback. We read every single e-mail you guys send in, and we respond when appropriate. If the response is something worth sharing with everyone, we'll answer right here in the newsletter the way we're getting ready to. Mark writes: "I really appreciate the graphs of up and down volume and advance and decline lines. I have heard that the number of new lows is an good indicator of changes in market direction. I think that in any kind of a healthy bull market the number of new lows should be in the few 10's and any meaningful advance over 50 is indicative that the market is weakening and will soon drop. On the other hand if the number has been high and settles down it would indicate that a market advance is in the near future. I wonder what your thoughts on this are and if you agree would you consider adding a graph of new lows to the ones in today's newsletter. Thanks for the informative newsletter." Thanks for the question, Mark. Using new highs and new lows as a market barometer is something we've toyed with before, and even looked at in prior newsletters (though it's been years ago, if memory serves). I personally see some value in the idea, though in my experience it's been tough to use in the conventional way you're describing. For me, I've only found reliable use in the data as a contrarian tool.... meaning I'm bearish when the new highs look wildly bullish and I'm bullish when new lows look exceedingly bearish. Just to make sure we're all on the same page, the chart below is the data Mark is talking about. On it we've plotted the S&P 500 with the NYSE's "new highs" for each day and the NYSE's "new lows" for the day. The theory is, a high numbers of new highs will coincide and signal a strong bullish trend, and conversely, a high number of new lows will coincide with and point to a strong bearish trend. In general, the premise works. The problem I always ran into with it was, what's the right number of new highs or new lows to say the market's trend is bearish or bullish? The day-to-day changes are pretty volatile. For me, the "right" number was always changing over time. There were very few new 52-week highs in mid-2009, but that was a great time to be long. Conversely, there were huge new-high levels seen in early and mid 2007, right up until the point where the market suddenly stopped making new highs and began to unravel. So, from my point of view, there's a lot to be said for the idea, but I've yet to figure out a specific number. Even without a specific methodology or number though, I do think you're right in that this is something to bear in mind when trying to figure out just how healthy the market is or isn't. It's just going to be something you have to get a feel for rather than quantify, in my opinion. [If anybody out there has a quantifiable methodology they're using to trade new highs and new lows, we're open minded. So feel free to chime in.] That being said, though it's also not something I've been able to quantify, I have noticed that new highs tend to spike - in the hundreds - at major market tops. Conversely, new lows tend to spike - also in the hundreds - at major bottoms. These spikes tend to materialize at the same time we see similar spikes and troughs from the VIX, put/call ratios, and other sentiment indicators. So, we're able to use new highs and new lows as a contrarian indicators in some circumstances. On our chart below you can see how the October bottom was made when new lows blew through the roof. In any case, I'll keep playing with a true automated buy/sell signal for the new highs and new lows data. Maybe it's just something as simple as waiting for the moving averages of the NYSE's new highs and news lows to cross one another. We'll see. In the meantime I'll be sure to send you an updated version of the chart above if it looks like it's doing anything noteworthy. Thanks again for the question Mark. Even if we're not sure what the exact answer is, there's value in at least putting the idea on our radar. Kaboom... Almost Yes, technically speaking, today marks the beginning of a bearish trend. You know what though? Before any of us stand up on the mountaintop and shout about how much trouble the market's in, may I play the devils' advocate? While Friday was harsh in the sense that the S&P 500 broke under its pivotal 20-day moving average line (blue) at 2094, I'll also point out the 2064 area - already a key line in the sand - seems to have stopped the bleeding. The VIX also appeared unable to hurdle its 20-day moving average line. Maybe it's just a coincidence. Maybe there just wasn't any more selling to unleash today and this just happens to be where things stopped. Or, maybe the bulls have already begun to rally the troops, and have no intention of letting the S&P 500 move past a key battle line. My guess is, there's more downside to go. There's no particular risk in waiting to see how it all pans out, however, now that we're at the inflection point. We should have some good clarity by the middle of next week. We'll sign off for the day and the week right there, and get back to it on Monday when we have some fresh action to talk about. In the meantime, those of you who are signed up for the free trading alerts from the Elite Opportunity team got a very important alert late yesterday. If you didn't register for the free service, well, you didn't get anything. You don't have to miss the next trading idea though - just sign up. It's fast, easy, and most important., it's free to do so. Just go here, or cut and paste this link: https://www.smallcapnetwork.com/pages/SCNEOL/v1/