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02/03/12

The National Bureau of Labor Statistics released Non-Farm payrolls numbers this morning.  Employment grew by 243,000 in January, more than the 150,000 expected.  This was the best report since last April, and the unemployment rate dropped to 8.3%, the lowest reading since February 2009.

Equity markets were positive in pre-market trading, but jumped decisively when the payrolls numbers were announced.  Precious metals trended lower; as an improving economy lessens the likelihood the Federal Reserve will initiate another round of quantitative easing.

Unemployment percentages increase to 15.1% if the statistics include those people that have quit looking for work and people that have taken part-time work while still looking for a better job.  The Labor Department revised November and December’s reports to show an additional 60,000 jobs were created during those months.

Greece looks to be stumbling along to an agreement with private creditors, but is short of political will to cut up to an additional $7.5 billion dollars from this year’s budget.  The Greek economy is shrinking, which reduces taxes and increases social payments for unemployment and other entitlement benefits.

The government needs to cut spending to stay within the deficit targets for 2012 to receive more aid.  Greece’s finance minister said the government may look to cut military spending, reduce spending on medicine and shut down some state run entities.

The market is rallying like there is no tomorrow.  Shorts are being crushed.  The NASDAQ is at its highest level since it was coming down after the “internet bubble” on 11/17/2000.  We don’t know what to think of this 15 year chart, but are happy to be an observer of the market (and not a big participant) at these levels.

Not to be outdone the DJI is just about to bust above last May 2, 2011’s high of 12,876.  If successful, we will be at the highest level since May 20, 2008 when the market was falling out of bed going into the credit crisis.  This 5-year chart may be of interest to you.

We talked to A.M. yesterday, one of our favorite professional traders.  I asked him when the market was going to rollover.  He laughed and told me he was bloody from trying to short the market.  He is still finding good setups and entering small trades.

We have been selling into the rally all the way up, and find ourselves with cash, waiting to re-enter.  It is a good time to relax and let things work themselves out.  Anyone who believes the market is going to continue to rally just needs to answer one question.  Where does the S&P end the year?  If you answered 1400, you are with most analysts and market participants.  This betrays a bullish stand, but that is ok, we all need to be optimists.

Now, answer one more question.  How is the market going to get to 1400 on the S&P?  We are 60 clicks away from 1400.  Is it your belief the market will advance from here an average of 5 clicks per month, including through the summer, without any serious pullbacks?

It is hard not to be fully invested in a bull run higher like this.  Just remember, the score at the end of the game is what matters.

The middle innings are just entertainment.

Quote:
Politics is supposed to be the second-oldest profession.  I have come to realize that it bears a very close resemblance to the first.---Ronald Reagan

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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