It’s been one week since Barataria made the prediction that if good news came in on jobs the stock market would tank. The good news came in, with the headline unemployment number slipping below 6% for the first time since 2008. Immediately, the market proved Barataria to be wrong. Then right. Then wrong. Then right, again.
It’s been a roller-coaster of a week. How does that stack up with any prediction at all?
It’s probably time to make another prediction. Let’s stick with the first one, that the stock market is due for a decent but not horrific “correction” that re-affirms that we’re really still in a secular bear market. But with the focus on Fed action we are also entering a time when the logic of the market finally turns rightside up – and good news will once again become unalloyed good news.
We just have to get through the ride before we know what’s up – literally up.
The big test for the stock market comes with the release of unemployment figures, which probably has already occurred if you are reading this after 3 October. If unemployment comes in at better than last month’s 6.1%, what is also expected this month, there will be a serious problem for the stock market.
How is that? Do rich people only prosper when the working stiffs are suffering? The short answer is “no”, but the long answer is “yes”. It shouldn’t be set up that way, but the fragile bubble at the end of a 3 year long expansion in the S&P500 is kept aloft partly by Fed Action – and that comes to a halt as good news trickles in.
The Dow Jones Industrial Average (DJIA) is down for the third straight day. News outlets that have to attribute it to something attribute it to “global tension,” which does appear to be running a bit higher than usual. But the entire exercise of watching an index from one day to the next is a bit silly from the start.
A more interesting question asked by some commentators is, “Does this mean that the bull market is over?” The short answer is no, it doesn’t, but not for the reasons that most people think. The reality is that we have been in a secular (or long term) bear market since 2000, roughly the start of what we call a “Managed Depression,” and this small correction is nothing but a regression to the mean that proves it.