Daily Commentary - Posted on Monday, February 6, 2012, 10:01 PM GMT +1

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Feb Monday 6

Employment Situation

On Friday’s non-farm payroll release day, unemployment rate had been reported to have fallen from 8.5% to 8.3%, its lowest level in three years, and down on the 5th consecutive month. As is known, the S&P 500 had closed at a fresh 6-month high following January’s positive non-farm payroll report, up 1.46% for the day.

Historically, when the S&P 500 had gained ≥ 0.50% on a non-farm payroll release day when the unemployment rate had been above 6.0%, but down from its level three months earlier (a positive surprise on high levels), this had intermediate–term bullish implications in the past.

Table I below shows the S&P 500’s performance (cumulative returns) 1 week as well as 1 to 3 months later, followed by the number of sessions until the S&P 500 had posted a higher close in the event (all at the same time) the S&P 500 had gained ≥ 0.50% on a non-farm payroll release day when the unemployment rate had been above 6.0%, but down from its level three months earlier.

The S&P 500 had closed at a higher level one week later on 22 out of 28 occurrences (down -1.0%+ only once), one month later on 20, two months later on 25 and three months later on 24 out of 28 occurrences, and posted at least one higher close over the course of the then following week (5 sessions) on 25 out of 28 occurrences (and 3 weeks later latest on all 28 occurrences).

(click on image to enlarge)


Table I
S&P 500 up on non-farm payroll release day (positive surprise)

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Conclusion(s)

Even fundamental news are suggesting that the market will probably remain on firm path over the course of the next couple of months.

Have a profitable week,

Frank


Disclosure: No position in the securities mentioned in this post at time of writing.

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Remarks: Due to their conceptual scope – and if not explicitly stated otherwise – , all models/setups/strategies do not account for slippage, fees and transaction costs, do not account for return on cash and/or interest on margin, do not use position sizing (e.g. Kelly, optimal f) – they’re always ‘all in‘ – , do not use leverage (e.g. leveraged ETFs), do not utilize any kind of abnormal market filter (e.g. during market phases with extremely elevated volatility), do not use intraday buy/sell stops (end-of-day prices only), and models/setups/strategies are not ‘adaptive‘ (do not adjust to the ongoing changes in market conditions like bull and bear markets). Index data (e.g. S&P 500 cash index) does not account for dividend and cash payments.

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Disclaimer

The information on this site is provided for statistical and informational purposes only. Nothing herein should be interpreted or regarded as personalized investment advice or to state or imply that past results are an indication of future performance. The author of this website is not a licensed financial advisor and will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on the content of this website(s). Under no circumstances does this information represent an advice or recommendation to buy, sell or hold any security.

I may or may not hold positions for myself, my family and/or clients in the securities mentioned here. Actions may have been taken before or after information is presented, and any opinions expressed in this site are subject to change without notice.

(Data courtesy of MetaStock and Pinnacle Data Corp., and for data import, testing, surveys and statistics I use MATLAB from MathWorks)

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