Is everyone ready for the weekend? Or, in some cases, is everyone bundled up for the weekend? A bunch of us have been hit by unusually cold temperatures and more than a little snow, and though most of it's gone, there's still a little more of the same in store for the next couple of days. Ugh. Anyway, we didn't want to talk about the weather today. That's what meteorologists are for. We're here to talk about the market's trend, some major economic news unveiled today (yes, the unemployment picture), and answer a reader's question. Let's start with a look at the rest of the unemployment story you didn't get today. Employment, Under the Microscope Yes, the unemployment rate dropped from 5.8% to 5.6% on the heels of 252,000 newly-created jobs. The unemployment rate rolled in even lower than the expected 5.7% figure, and the number of new jobs for December topped expectations of 235,000 new payrolls. The question is, can we really believe things are as good on the jobs front as today's headlines would have us believe? There's only one way to find out. What you didn't hear: The total number of people with jobs right now did indeed move higher, though not to the degree the jobs growth number implied. The total, seasonally-adjusted number of people reporting they have jobs grew from 147.331 million in November to 147.442 million for December. That's a 111,000 upswing. Conversely, the total number of people who are officially unemployed (though still want to be employed) fell from 9.071 million to 8.688 million. That's a 383,000 improvement, and more in line with the reported 252,000 new jobs for last month. In other words, yeah, the numbers were solid, although we still don't think they're rock-solid. A big part of the reason the unemployment rate fell so precipitously was rooted in the fact that the size of the labor force actually diminished, from 156.402 million to 156.129 million. Since the unemployment rate is determined by dividing the number of unemployed people by the size of the official labor pool, a smaller divisor made it possible to really push the unemployment rate lower. But, even if the labor force hadn't contracted we'd still have made net progress on the jobs front. The thing to bear in mind about all this progress is, these are baby steps. Only 59.2% of the nation's populous is employed at this time, which is well under the 60+ level we've seen for decades. Simultaneously, only 62.7% of the populous is part of the labor force, which is a multi-decade low. The counter-argument to the participation rate worries is that the ongoing mass retirement of baby boomers is really pushing these figures lower. I don't disagree with the idea. In fact, I do think these numbers should be below historical norms for that very reason. But, they shouldn't be this low. All the same, we're moving ahead on the employment front. On the Fence We're going to keep this short and sweet today, partly because we've got a lot to say in the next and final segment of today's newsletter, and partly because there's just not a lot to say about today's market action that you didn't already know from this week's earlier newsletters. We'll stick with our focus on the NASDAQ Composite today, though we'll add how the S&P 500 chart is telling us the same thing for the same reason. Take a look. The NASDAQ peeled back a bit today after overdoing things on Wednesday and Thursday, but the bulls had no intention of letting any of the major indices close below their 20-day and 50-day moving average lines. This a victory for the bulls, even if winning this battle doesn't mean they've won the war yet. What I see when I look at this chart is not just a market that's stuck between a rock and a hard place, but investors who are simply unsure about what's ahead. And yes, I still think valuations are weighing on investors' minds here. The only two cures for the valuation problem are strong earnings growth or a sharp pullback (or a combination of both). This five-week dance all around the short-term moving average lines only underscores the lack of conviction from traders. I'll say this much though... I like the way the NASDAQ has been able to find decisive support at its 100-day moving average line (gray). This may all be nothing more than a consolidation phase under 4811, setting up a breakout later this month. Let's wait for more proof of that, though. Q&A As you ought to know by now (if you've been part of the SCN community for at least a few weeks), we read every comment, question, and feedback you guys and gals send us. When it makes sense to do so, we'll respond right here in the newsletter, since odds are good more than one of you are thinking or wondering something. We got one such piece of feedback last night I thought was worth looking at publicly today. Gary writes: "I read your newsletter each day. Not to offend but usually your newsletter sounds like the sky may be falling soon. I am sure 1 day it will. Go back and count the number of days you warned about the correction or negative signs ----- you really believe that has been helpful? Seems to me the macro forces don't support your view. The sky isn't falling, the world isn't ending but someday we may have a correction." Thanks for the question/feedback, Gary. And, thanks for being a loyal reader. I spent the better part of the day thinking about how we could best respond. First and foremost, I get what you're saying. While I don't personally think we adopt a panic-stricken stance every day, there's no denying we've expressed concern more than usual for the past several days... maybe even weeks now. But, it's not an effort to create fear or hysteria. It's primarily to get all of you thinking about things the rest of the media is choosing to ignore. The bulk of the rhetoric out there right now is bullish, so just in the interest of helping you find balance, we're not letting anyone forget the market still has some major issues it will have to face sometime. Be that as it may, as you suggested, I actually did go back and count the days we've opined bearishly. I also cross-referenced those with the market's results. After doing so, I was better equipped to answer your question about whether or not our warnings and pessimism have been helpful. The answer is, yes, we do believe this has been helpful. Just as a reminder, we were decidedly bullish back on October 15, explicitly saying that session was a capitulation and a reason to be bullish. It wasn't until October 22nd we started to voice concerns again, but we clearly reversed that call on October 28th to help traders ride a little more bullishness (a "little more" being through early November ). I think it was then we started expressing our worries on a pretty regular basis. Here's the thing.... the S&P 500 is only up 1% since early November when our pessimism became a near-daily thing. That's not enough upside for most investors to bother trying to capture. We're more interested in bigger moves -- as in 5% or more -- like the kind we saw coming when we went bullish back on October 15th. So, to answer your question, while nobody has made any money on our bearishness yet, nobody has been sucked into thinking the market was going to race higher either, only to get whipped around by some extreme volatility. That's part of the value we bring to the table. It still remains to be seen if our worries since early November are merited or not, but with only a 1% gain between then and now, it's certainly not been disproved. With all of that being said, Gary's question is actually a perfect segue into a bigger message we probably don't convey often enough. Though our daily market chat may seem like it's short-term in nature, it's actually geared more for longer-term and intermediate-term investors. Oh, short-term swing traders and scalp traders can certainly get something out of it, but the bulk of our perspective is written for those who don't necessarily trade all the time. Our analysis is simply meant to put the market's short-term volatility into a bigger-picture context in the ongoing hunt for bigger moves. All of it matters though. Our worries Gary was/is talking about are longer-term in nature, even if mixed in with the daily short-term discussion. Why don't we do more short-term prediction stuff? Two reasons. The first one is, being an end-of-day newsletter, we simply can't give short-term traders what they need. The second reason is, well, we actually do short-term trading analysis - we just do it through the Elite Opportunity newsletter, which is much better equipped to handle that sort of thing because it's sent in the middle of the trading day. It's one heck of a combination, if you asked me... short-term expertise from John Monroe and his team, and longer-term analysis from me and my team, with the occasional overlap when the need arises. On that note, if you're not getting both this newsletter AND the Elite Opportunity newsletter, you're not getting all the perspective you need to become a well-armed trader. The EO team is second-to-none when it comes to day-to-day trading. Here's how to sign up, or cut and paste this link: https://www.smallcapnetwork.com/pages/SCNEO/v1/ And, thanks again Gary, for the question and comment. We hope this helped everyone get a better understanding of our perspective and how it differs from the Elite Opportunity's perspective. You really should be reading them both.