The headlines from Friday’s job report were quite intriguing. The number of jobs created came in significantly under the estimate yet the unemployment rate caved in an apparent sign of economic strength. I’ve been following these numbers closely for about 20 years and have never seen such an odd set of divergent numbers. Think about it- many many less jobs were created as compared to the forecast yet the rate of joblessness plunged. According to a Yahoo article by AP Economics writer Christopher Rugaber, the unemployment rate is sinking at the fastest pace in half a century because a surprisingly large number of people say they're finding work” and the survey “doesn't count the self-employed and likely undercounts the nation's smallest businesses.” It turns out that the number of people who consider themselves to be self-employed rose sharply (165,000) to 9.7 million. It also didn’t help that weather play a part in the mix as well. Basically, the aptly named underemployment rate- which includes part-time workers who want full-time work but have given up looking fell from 16.7% to 16.1%. Also, the report also showed a decrease in the number of long-term unemployed Americans. The number of people unemployed for 27 weeks or more fell to 43.8% from 44.3% as a percentage of all jobless. This all sounds good and it is quite true that those who do work for themselves (such as day traders) do not count as employed amid the arcane rules of the jobs report. But there is a lot of scary ammunition as well. One major reason why the jobless rate has fallen almost a full percentage point in the past two months is that over 750,000 people have left the work force. In fact, according to the official minutia as one skims through the report, there are two million (yes…two million) fewer people in the work force as compared to January 2010. Furthermore, the ‘participation rate’ which is the amount of civilian people in the work force fell to its lowest level since 1984. Also, there are about 500,000 more people in January 2011 as compared to January 2010 who are not considered to be in the labor force (i.e. they stopped filing for unemployment and such). How about these numbers- the number of people not in the labor force (declining from 153.7 million to 153.2 million year-on-year) by the official account has risen from 83.9 million to 86.2 million in the last year while the number of unemployed has collapsed from 15 million to 13.9 million in two months! The only logical reason for this is that many people have completely fallen out of the Bureau of Labor Statistics count for reasons already cited here while others have given up on finding a job. So, my general take from the report is that the Bureau of Labor Statistics needs to modernize its methodology for providing a more accurate account of the labor force and seemingly decent numbers aren’t telling the true tale of what is going on in the U.S. labor force.
Markets overnight were generally higher throughout the world. Tokyo was up 0.5%, London 0.7% to the good, and Frankfurt ahead 0.8%. Oil and gold are up slightly, the dollar is little changed, and bonds are down slightly. Futures are modestly ahead 9albeit off of their highs). The only economic number of note is consumer credit at 3PM ($2.5 billion estimate). The one remains a positive one in shaking off Friday’s jobs number with selected merger activity out there. The bias will likely hold for the duration of the session on a bit lighter volume than we’ve seen in recent weeks as earnings season winds down and some traders take a Super Bowl Monday off. The focus will likely be on those aforementioned deals (such as BEC/DHR and ESV/PDE), small cap biotechs (such as OPTR and PGNX), A-B-A2’s to Friday’s momentum plays (such as TA), and the financials off of the BAC news.
If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified.
If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-
Good- The following stocks have good news and/or a strong technical pattern
NPTN- closed near a high
FN- closed near a high
SFLY- closed near a high
AAPL- closed near a high
V- closed near a high
JOYG- closed near a high
IMOSD- closed near a high
BIG- closed near a high
FTNT- closed near a high
APKT- closed near a high
AVGO- closed near a high
LCRY- closed near a high
DSCI- closed near a high on a continued rally from a positive phase II trial for one of its products
GMCR- closed near a high on continued momentum from last week’s earnings report
RPRX- closed near a high despite offering 2.76 million shares of stock
ZOLT- closed near a high after posting earnings
CALX- closed near a high after posting earnings
FEIC- closed near a high after posting earnings
POWI- closed near a high after posting earnings
KNL- closed near a high after posting earnings
XXIA- closed near a high after posting earnings
ECGI- closed near a high after posting earnings
JDSU- closed near a high after posting earnings
CDXS- closed near a high after posting earnings
CIEN- closed near a high in moving with JDSU
CCME- closed near a high amid a vehement denial of a Muddy Waters report
BEC- received $83.50/share cash buyout bid from DHR
BAC- exited reverse mortgage origination business and will shift resources to its core mortgage operations
GTLS- featured on “Mad Money” on Friday
EPCT- reported positive results from EpiCept NP-1 trial in patients with chemotherapy-induced peripheral neuropathy
IDCC- positive article in “Barron’s”
PGNX- in licensing pact with SLXP over Relistor
OPTR- announced collaboration to commercialize Fidaxomicin
PDE- received buyout bid from ESV for .4778 newly issued ESV shares plus $15.60 cash per share
Bad-The following stocks have bad news and/or a weak technical pattern
CPX- closed near a low after posting earnings
LVS- closed near a low after posting earnings
CSTR- closed near a low after posting earnings
UTI- closed near a low after posting earnings
FSLR- closed near a low
X- closed near a low after a cautionary note from UBS
CTSH- poor earnings
HAS- poor earnings
HUM- poor earnings
SYY- poor earnings
Earnings:
MON FEB 7 BEFORE
CTSH HAS HUM
L LO
MON FEB 7 AFTER
BDX CRK FMC
GLUU IT LNCR
PFG PRE PXD
SNCR VECO
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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