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  • Reason for Dow, Nasdaq and S&P 500 sell off on good employment report: No QE3, Game On with ECB 0 comments
    Jan 7, 2012 12:29 PM | about stocks: TVIX, TZA, SDOW, SPXU, VXX, ERY

    Today's, US employment report showed great sign of improvement with non farm payroll of 200k, average hourly earning of 0.2%, Avg work week increased to 34.4 hr and unemployment rate was 8.5%. Job gains occurred in transportation and warehousing, retail trade, manufacturing, health care, and mining. 
     
    European and US stock market dropped on this news as the chances of QE3 on Jan 25th is now over. Wall street likes free money whether its from Fed or ECB or from common individual investor. Since, Fed will not be printing free money for a while, so the next target was ECB. That's the reason we saw very big drop in Eur/Usd from 1.2790 to 1.2690 to pressurize ECB/France/Germany to get some more free money to this market. Merkel and Sarkozy are meeting on Jan 9th and then on Jan 12th, ECB will announce it rate policy. If there is no easing from ECB and with rating agency downgrade threat, we may see further drop of Eur/Usd to 1.25 level.
     
    The only good thing about today's employment report is 200k job were added for the month of December. Rest of the thing were negative. More then half of this job are temporary added in transportation, retail and warehousing, and this job will be lost in January as holiday season is over. The increase in hourly earning means its low paying job, which raises question on long term spending. The unemployment rate has been down for past two month,  because of the less participation rate during the 4 week survey, which doesn't include 2.5 million job seeker who looked for job in last 12 month. 


    Unemployment rate = 1- (Employment-population ratio/participation rate)

    For Dec employment population ratio = 58.5
    Participation rate = 64


    Unemployment rate = 1- (58.5/64) = 8.593 (Government would rather show it as 8.5% then 8.6%)

    A small change in participation rate or Employment population ratio, changes the unemployment rate drastically. 

    1.6 million non farm payroll job have been added in 2011 and 23.7 million are unemployed. Just calculate how long will it take to employ everyone who are out of work. Here is a detail of employment report http://www.bls.gov/news.release/empsit.htm 
     
    US has hit its original debt ceiling of 15.194 trillion dollar, which was then increased to another 4 billion on Jan 4th. US public debt is right now 15.201 trillion dollar. Non of this news has been shown in the main media.  http://news.yahoo.com/obama-delays-request-1-2t-debt-limit-increase-181945181.html 
     
    Since 2008 crisis, Government have become puppet of Wall street, which means bias media is puppet of Wall street. Instead of focusing on job and growth, the US and Europe Government are more concerned, how wall street will react on any news and the bias media is supporting them nicely by projecting only good headline or rumor in favor of Government or Wall Street. 

    This market is not safe for long term investor, I would suggest stay away from this market. Be a day trader only if you have time to watch your money
    Stocks: TVIX, TZA, SDOW, SPXU, VXX, ERY
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