If you are a bull, today gave you a lot of reasons to be happy. The market had every reason to go down today. The futures were down off of horrible economic data. Yahoo Finance has the AP story 4 new reports reveal battered economy:
The government released a quartet of reports Wednesday that paint a bleak picture of the nation’s economy: Jobless claims remain at recessionary levels, Americans cut back on their spending by the largest amount since the 2001 terrorist attacks, orders to U.S. factories plummeted and new-home sales fell to the lowest level in nearly 18 years.
The Labor Department reported that initial requests for unemployment benefits fell to a seasonally adjusted 529,000 from the previous week’s upwardly revised figure of 543,000. But claims remain at recessionary levels. The four-week average, which smooths out fluctuations, rose to 518,000, its highest level since January 1983, when the economy was emerging from a steep recession.
One minor bright spot showed the number of people continuing to claim unemployment insurance dropped unexpectedly to 3.96 million, from the previous week’s 4.02 million, which was the highest level in 25 years. The labor market has grown by about half since 1983.
Meanwhile, the Commerce Department reported that consumer spending plunged by 1 percent in October, even worse than the 0.9 percent decline that had been expected. Consumer spending accounts for two-thirds of total economic activity.
Orders to U.S. factories for big-ticket manufactured goods also plunged last month by the largest amount in two years. Orders for durable goods dropped by 6.2 percent, more than double the decline economists expected. The Commerce Department report showed widespread declines throughout manufacturing led by decreases in autos and airplanes.
The department also reported that new-home sales decreased 5.3 percent last month to a seasonally adjusted annual sales pace of 433,000 homes, the lowest level since January 1991, another period when the country was undergoing a steep housing downturn.
The median price of a new home sold in October fell to $218,000, down 7 percent from a year ago, and the lowest since September 2004.
Two of the bad reports came out before the market opened. They drove future prices down considerably. The housing report came after the market open. People were expecting a 3 percent drop. 5.3 percent is terrible. You’d expect a market with a down open to continue falling with news like that. Yet all day, the market set higher highs as it moved.
The unemployment news is an improvement, but it’s nowhere near “good.”
This is the first 4 day winning streak for the Dow since April.
Personally, I took part in the first two days of the rally entirely through luck. I sold off all but one of my puts, leaving me exposed to the downside (I mentioned this previously). At the end of the second day of this rally, I bought back some puts. I am now perfectly hedged again. As such, I don’t particularly care which way the market moves. Honestly, there could be another thousand Dow points to the upside between now and January. I’ll stay perfectly hedged for a short bit, but I’ll buy puts as the market goes up (I’ll wait another 300-500 Dow points before betting against this rally). I’m still bearish.
