Friday's Market Action

Today opened with a big gap down.    From yesterday's SP500 close of 1204.42 to an intermediate bottom of 1176.55 is about 28 points.  Wave 5 down has now begun, and the majority of the drop was a third wave within a third wave of subwave 1 down.  This will be confirmed when the index pierces through the lower bound of the up-slanting purple channel indicated yesterday.   This is currently at 1140, and passes through 1150 next Friday

Blaming exogenous reasons, this morning's Zach's email cites the Sept 1 Jobless claims report, and the ISM Manufacturing number that slipped to 50.6.  This is priceless: "At first, traders were delighted that ISM was above the anemic 48.5 estimate. But as reality settled in that the actual number is still headed in the wrong direction is why stocks finally succumbed to profit taking."  So the same number can be good news or bad news, or even both - depending on a post hoc look at daily market action.  That sums up the whole market action as news reaction story in a nutshell.  I'd say that about wraps it up for efficient markets, too.  Of course, that silly-ass idea should have died in the crash of 1987, but a good zombie can keep going for decades.   Mmmmm -- brains!

A worse-than-expected August jobs report is also part of the mix, if you believe that sort of stuff.  It's not clear to me why anyone with their eyes open would be subject to 30 SP500 points worth of surprise, based on these totally unsurprising news items.  But - people get paid to make this stuff up.

Now, I'll grant you that a net job creation number of zero is pretty disheartening.  But would the anticipated 60,000 have been much of a cause for joy?  And the downgrade of the previous two months numbers - now at 20,000 for June and 85,000 for July doesn't help.  It takes 150,000 new jobs per month, just to keep up with population growth.  So - every passing month puts us in a hole that is just a little bit deeper.  From the photo atop this news report, we can see that unemployment does not discriminate on age, race, or gender.   Of course, unemployment is much, much worse than the cooked reported numbers indicate.  But that's another story.

My wave 5 SP5000 stimate of 1000 to 1050 is now only 125 to 175 points away.  The recent corrective rally covered 130 points, so that does not seem out of reach. 

The other thing that the Zach's note points out is that September is historically the worst month for stocks - and this despite very famous crashes happening in October.  OTOH, last September saw a 10% gain.  As I mentioned yesterday, seasonal effects are only tendencies.  But the next couple of months will be very tough, indeed.

Update:  Mish provides graphs and numbers.  What he will never say, but I will, is that Rethugs recalcitrance has done a splendid job of making Obama fail, keeping the economy in the toilet, and offering the unemployed as collateral damage.

More after the close.

Update 2:  Well, we're back at about the 1170 level in the SP500, a support-resistance level of (short term) long standing and questionable effectiveness.  Here is a chart with my amateur Elliott wave analysis at no extra charge.  Everything you get here is free - and worth it!.

I mentioned earlier that the big drop today was a third wave of a third wave.  The chart illustrates the wave forms that made me think so.  This particular low level wave 1 down might now be complete, though other interpretations are possible.  They suggest, if anything, even more bearish interpretations.

Alas, we live in interesting times.
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