The Stock Market Pulse $49.95/month value December 1^st,  2008 Edition Weekly review of the markets Last week, we expected a rebound for technical reasons and believed the lower part of the channel we seem to be going through would now act as resistance. The shortened week because of the Thanksgiving holiday is historically the period where Americans spend the most. Considering the crisis we are going through, this is worrisome. Monday, as predicted the markers opened higher pushed by rumors the government would help Citigroup by injecting $20B in it. The existing home sales report came out at -3.1% and we are now starting to think this sector might be stabilizing. All 10 sub sectors finished higher closing at the resistance level we alluded to earlier. Tuesday, other measures totaling $800B to help the market were announced by the government. The first $600B will be dedicated to making credit more readily available to buying new homes while the remaining $200B will be allocated to buying cars, to obtaining student loans, credit cards and small business loans. On the economic front the GDP came out at -0.5% a couple of points lower then the last report (-0.3%). Consumer confidence surprised by coming higher then expected at 44.9 ( we were expecting 39.5). The markets took a breather to digest all this information creating what called a doji in terms of technical analysis which means the markets moved up and down all day but ended at the same level. This means we , once again, stayed at the all important resistance level. Wednesday M. Obama announced he had a plan in place to stimulate the economy which he will launch in January when he officially becomes the president of the United States of America. This news allowed investors to ignore to continuing flow of bad news on the economic front: Durable goods orders came out at -6.2% when we were expecting -2.5%! Personal outlays came out at -1% when we were expecting -0.6%, the Chicago PMI came out at 33.8 vs 39.5 and consumer sentiment came out at 55.3 vs 58.0… This avalanche of bad news would normally have caused the markets to crash but since we now seem to have reach a consensus the markets are way oversold all 10 sub sectors of the S&P500 closed much higher for a 4^th consecutive time. Thursday Thanksgiving holiday, all markets closed Friday markets were only open until 13hres thus it was expected to be a very quiet day with little volumes since a lot of players are “out” for the holiday long weekend. A last minute rally allowed the markets to close up for a 5^th consecutive day. Considering the low volumes, it is not very significant from a technical perspective though. Nevertheless, it was a very positive week, the first one in a long time… This Week Last week showed a lot of resilience to bad news which came out of everywhere, everyday day. Not only did we avoid going lower through the flurry of negative news but we managed to finish higher; significantly higher! We managed to climb up, uninterrupted, within our channel. The MACD, which gave us a false signal 2 weeks ago, is now giving us another one but this one is much stronger as shown below. Markets are definitely gaining strength. The coming week is brining along a bunch of very important economic news starting first thing Monday with Construction spending and the ISM Mfg Index. We are still expecting the latter to deteriorate. We need to see it over 50 to confirm growth. Wednesday the other ISM is coming out (non-mfg survey). Again, we are expecting a decline. Friday the employment situation is on along with the consumer credit report. See below for more details on the economic calendar. Technically, we seem to have a confirmed reversal. But is it going to hold? Are we really starting the next bullish trend? It’s way to early to tell and to make a call at this time is simply gambling. One thing is for sure the MACD signal is very strong which undoubtedly means the markets are getting stronger which in itself is good news… In terms of figures I would venture to signal the apparent formation of a reverse head and shoulder. More time is needed to confirm this though. Patience… See graphics, the S&P500: Now here’s the economic calendar for this week: Economic calendar (Reports I consider will impact the market the most with definitions and expectations) (Soon to be a section for Investor Rules members only ) Not a member yet? Just go to http://www.investorrules.com/membership.html Monday December 1^st Construction Spending 10:00 ET Consensus is -0.9% Definition The dollar value of new construction activity on residential, non-residential, and public projects. Data are available in nominal and real (inflation-adjusted) dollars. Why Do Investors Care? Construction spending has a direct bearing on stocks, bonds and commodities because it is a part of the economy that is affected by interest rates, business cash flow and even federal fiscal policy. In a more specific sense, trends in the construction data carry valuable clues for the stocks of home builders and large-scale construction contractors. Commodity prices such as lumber are also very sensitive to housing industry trends. Businesses only put money into the construction of new factories or offices when they are confident that demand is strong enough to justify the expansion. The same goes for individuals making the investment in a home. A portion of construction spending is related to government projects such as education buildings as well a highways and streets. While investors are more concerned with private construction spending, the government projects put money in the hands of laborers who then have more money to spend on goods and services. That's why construction spending is a good indicator of the economy's momentum. ISM Mfg Index 10 :00 ET Consensus 38.4 Definition The Institute for Supply Management surveys more than 300 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. A composite diffusion index of national manufacturing conditions is constructed, where readings above (below) 50 percent indicate an expanding (contracting) factory sector. Export orders, import orders, backlog orders and prices paid for raw and unfinished materials are also measured, but these are not included in the overall index. (Institute for Supply Management) Why Do Investors Care? Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures. The ISM manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. More than one of the ISM sub-indexes provides insight on commodity prices and clues regarding the potential for developing inflation. The Federal Reserve keeps a close watch on this report that helps it to determine the direction of interest rates when inflation signals are flashing in these data. As a result, the bond market is highly sensitive to this report. Tuesday December 2^nd ICSC-Goldman Store Sales 7:45ET Definition This weekly measure of comparable store sales at major retail chains, published by the International Council of Shopping Centers, is related to the general merchandise portion of retail sales. It accounts for roughly 10 percent of total retail sales. Why Do Investors Care? Consumer spending accounts for more than two-thirds of the economy, so if you know what consumers are up to, you'll have a pretty good handle on where the economy is headed. Needless to say, that's a big advantage for investors. The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Retail sales growth did slow down in tandem with the equity market in 2000 and 2001, but then rebounded at a healthy pace between 2003 and 2005. The ICSC-Goldman index is one of the most timely indicators of consumer spending, since it is reported every week. It gets extra attention around the holiday season when retailers make most of their profits. It is also a useful indicator when special factors can cause economic activity to momentarily slide. For instance, it was widely watched in the aftermath of Hurricanes Katrina and Rita which hit New Orleans and the Gulf Coast in 2005. The ICSC-Goldman Sachs store sales series previously was known as ICSC-UBS before Goldman Sach's involvement with ICSC. The name change took place with the September 30, 2008 release. Redbook 08:55 ET Definition A weekly measure of sales at chain stores, discounters, and department stores. It is a less consistent indicator of retail sales than the weekly ICSC index. It is also calculated differently than other indicators. For instance, figures for the first week of the month are compared with the average for the entire previous month. When two weeks are available, then these are compared with the average for the previous month, and so on. It might be more useful to compare year-over-year figures since these are indeed compared to the comparable week a year ago. This index is correlated with the general merchandise portion of retail sales covering only about 10 percent of total retail sales. Why Do Investors Care? Consumer spending accounts for two-thirds of the economy, so if you know what consumers are up to, you'll have a pretty good handle on where the economy is headed. Needless to say, that's a big advantage for investors. The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Retail sales growth did slow down in tandem with the equity market in 2000 and 2001, but then rebounded at a healthy pace between 2003 and 2005. The Redbook is one of the more timely indicators of consumer spending, since it is reported every week. It gets extra attention around the holiday season when retailers make most of their profits. It is also a useful indicator when special factors can cause economic activity to momentarily slide. For instance, once again, it was widely watched in the aftermath of Hurricanes Katrina and Rita which hit New Orleans and the Gulf Coast in 2005. Wednesday December 3^rd MBA Purchase Applications 07:00ET Definition The Mortgage Bankers' Association compiles various mortgage loan indexes. The purchase applications index measures applications at mortgage lenders. This is a leading indicator for single-family home sales and housing construction. Why Do Investors Care? This provides a gauge of not only the demand for housing, but economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the Mortgage Bankers Association purchase applications, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once a home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, housing construction has a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the MBA purchase applications index carries valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies. Challenger Job-Cut Report 7:30ET Definition A monthly report on the number of announced corporate layoffs. It is not adjusted for seasonal variations. The report indicates trends in the labor market. Why Do Investors Care? These statistics on layoffs help us gauge the strength of the job market. Fewer layoffs suggests more people have jobs. Every job comes with an income, which gives a household spending power. Spending greases the wheels of the economy and keeps it growing, so the stronger the job market, the healthier the economy. There's a downside to it, though, which is relevant these days. When few people are looking for jobs, businesses can have a tough time finding new workers. They might have to pay overtime to current staff, use higher wages to lure people from other jobs, and in general spend more on labor costs because of a shortage of workers. This leads to wage inflation, which is bad news for the stock and bond markets. The Challenger report breaks down the layoffs into industries, which provides insight to trends that likely will effect stock prices in specific industries. Note that not all announced layoffs culminate in actual layoffs. ADP Employment Report 8:15 ET Definition The ADP national employment report is computed from a subset of ADP records that in the last six months of 2006, represented approximately 364,000 U.S. business clients and approximately 22 million U.S. employees working in all private industrial sectors. The data are collected for pay periods that can be interpolated to include the week of the 12th of each month, and processed with statistical methodologies similar to those used by the U.S. Bureau of Labor Statistics to compute employment from its monthly survey of establishments. ADP contracted with Macroeconomic Advisors to compute a monthly report that would ultimately help to predict monthly nonfarm payrolls from the Bureau of Labor Statistic's employment situation. The ADP report only covers private (excluding government) payrolls at this time. (Automatic Data Processing (ADP)/Macroeconomic Advisers) Why Do Investors Care? Market players have become accustomed to the excitement on employment Friday and realize the rich detail of the monthly employment situation can help set the tone for the entire month. While economists have certainly improved their nonfarm payroll forecasts over the years, it is not unusual to see surprises on employment Friday. To that end, the new ADP national employment report can help improve the payroll forecast by providing information in advance of the employment report. The employment statistics also provide insight on wage trends, and wage inflation is high on the list of enemies for the Federal Reserve. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus. Initially, the ADP national employment report will not have wage information, but their goal is provide wage information, along with industry and regional information as well. Nonetheless, by tracking jobs, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process. Productivity and Costs 8:30ET Consensus Non Farm 0.9% Consensus Unit Labor Cost 3.6% Definition Productivity measures the growth of labor efficiency in producing the economy's goods and services. Unit labor costs reflect the labor costs of producing each unit of output. Both are followed as indicators of future inflationary trends. Why Do Investors Care? Productivity growth is critical because it allows for higher wages and faster economic growth without inflationary consequences. This is a hot topic these days with the economy so strong, the labor market so tight, yet inflation so well-behaved. Some Wall Street experts assert that dramatic productivity advances are allowing the economy to sustain a much faster pace of growth than previously thought possible. Fed chairman Greenspan has expressed skepticism about those assertions, however. In either case, the productivity data give investors important clues on how stocks and bonds can be expected to perform, and the market reactions to these releases show the true importance of productivity growth. ISM Non-Mfg Survey 10:00ET Consensus: 43.0 Definition The non-manufacturing ISM surveys nearly 400 firms from 60 sectors across the United States, including agriculture, mining, construction, transportation, communications, wholesale trade and retail trade. Beginning with the January 2008 report, a new composite index was made public and is now the headline number. It is considered an indicator of the overall economic conditions for the non-manufacturing sector and consists of four equally weighted indexes: business activity, new orders, employment, and supplier deliveries. Why Do Investors Care? Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data like the ISM non-manufacturing survey's business activity index, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly-and causing potential inflationary pressures. The ISM manufacturing index has a long history - dating to the 1940s. This new report (beginning in 1998) was originally not adjusted for seasonal variation, but the ISM has since established seasonally adjusted figures for several of the ISM non-manufacturing components (including the business activity index) since 2002 and a composite index starting in 2008. As a result, the ISM non-manufacturing survey has garnered more attention and is almost as widely followed by financial market participants as its manufacturing cousin. EIA Petroleum Status Report 10:35 ET Definition The Energy Information Administration (EIA) provides weekly information on petroleum inventories in the U.S., whether produced here or abroad. The level of inventories helps determine prices for petroleum products. Why Do Investors Care? Petroleum product prices are determined by supply and demand - just like any other good and service. During periods of strong economic growth, one would expect demand to be robust. If inventories are low, this will lead to increases in crude oil prices - or price increases for a wide variety of petroleum products such as gasoline or heating oil. If inventories are high and rising in a period of strong demand, prices may not need to increase at all, or as much. During a period of sluggish economic activity, demand for crude oil may not be as strong. If inventories are rising, this may push down oil prices. Crude oil is an important commodity in the global market. Prices fluctuate depending on supply and demand conditions in the world. Since oil is such an important part of the economy, it can also help determine the direction of inflation. In the U.S. consumer prices have moderated whenever oil prices have fallen, but have accelerated when oil prices have risen. Beige Book 2:00 ET  Definition This book is produced roughly two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Fed district bank compiles anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts. Why Do Investors Care? This report on economic conditions is used at FOMC meetings, where the Fed sets interest rate policy. These meetings occur roughly every six weeks and are the single most influential event for the markets. Market participants speculate for weeks in advance about the possibility of an interest rate change that could be announced upon the end of these meetings. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching. If the Beige Book portrays an overheating economy or inflationary pressures, the Fed may be more inclined to raise interest rates in order to moderate the economic pace. Conversely, if the Beige Book portrays economic difficulties or recessionary conditions, the Fed may see the need to lower interest rates in order to stimulate activity. Since the Beige Book is released two weeks before each FOMC meeting, investors can see for themselves at least one of the many indicators which Fed officials will use to determine interest rate policy, and can position their portfolios accordingly. Thursday December 4^th Chain Store Sales Definition Monthly sales volumes from individual department, chain, discount, and apparel stores are usually reported on the first Thursday of each month. Chain store sales correspond with roughly 10 percent of retail sales. Chain store sales are an indicator of retail sales and consumer spending trends. Why Do Investors Care? Consumer spending accounts for more than two-thirds of the economy, so if you know what consumers are up to, you'll have a pretty good handle on where the economy is headed. Needless to say, that's a big advantage for investors. The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Spending at major retail chains did slow down in tandem with the equity market in 2000 and 2001 and again in 2003, but strengthened in 2004 and 2005. Chain store sales not only give you a sense of the big picture, but also the trends among individual retailers and different store categories. Perhaps the discount chains such as Target and Wal-Mart are doing well, but the high-end department stores such as Tiffany's are lagging. Maybe apparel specialty retailers are showing exceptional growth. These trends from the monthly chain store data can help you spot specific investment opportunities, without having to wait for the quarterly or annual reports. Just a few words of caution. Sales are reported as a change from the same month, a year ago. It is important to know how strong sales actually were a year ago to make sense of this year's sales. In addition, sales are usually reported for "comparable stores" in case of company mergers. Monster Employment Index 06:00ET Definition Monster collects job postings from 1,500 web sites (including Monster.com) and creates an index of job availability, akin to The Conference Board's help wanted index. The difference between the two is that one collects help wanted advertising from newspapers and the other collects from online posting. The Monster index is not seasonally adjusted. Why Do Investors Care? In addition to providing insight on the general strength of the economy, this report gives a sense of how many jobs employers are trying to fill. If that number is relatively high, it could mean there is a shortage of available workers and companies may have to offer higher wages to attract them. This leads to wage inflation, which is bad news for the stock and bond markets. Federal Reserve officials are always worried about the potential for inflationary pressures. When the employment index measuring job availability is falling, this bodes well for the bond market because it implies a drop in labor demand and perhaps an economic downturn. While the Fed worries about inflation, they also are concerned about rising unemployment. A rising jobless rate can mean a more accommodative monetary policy. The equity market prefers to see healthy economic growth and thus would rather see increases in the employment index. An increase in job demand means that consumers will have more money to spend on goods and services - and this ultimately affects profits. BOE Announcement 07:00ET Definition The Bank of England Monetary Policy Committee consists of nine members. The Committee meets monthly for two days, usually during the first week in the month in order to determine the near-term direction of monetary policy. Changes in monetary policy are announced immediately after the meetings, but no details are available until the minutes are published two weeks later. Why Do Investors Care? The Bank of England determines interest rate policy at their monetary policy meetings. The MPC is composed of the Governor, two Deputy Governors, two Bank Executive Directors, and four experts appointed by the Chancellor of the Exchequer. The MPC meets monthly (usually the first Wednesday and Thursday of the month) to determine interest rate policy. Unlike the Federal Reserve, Bank of Japan, or the European Central Bank, the Bank of England has an established fixed inflation target of 2 percent. The Bank uses the consumer price index to measure inflation. As in the United States, market participants speculate about the possibility of an interest rate change at these meetings. If the outcome is different from expectations, the impact on British markets -- and to some extent in Europe -- can be dramatic and far-reaching. The interest rate set by the Bank of England, serves as a benchmark for all other rates. A change in the rate translates directly through to all other interest rates from gilts (fixed interest government securities named after the paper on which they were once printed) to mortgage loans. The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the stock market, while lower interest rates are bullish. ECB Announcement 07:45ET Definition The European Central Bank Governing Council consists of 18 members. The Committee meets twice a month. The first monthly meeting of the month is devoted to monetary policy. Changes in monetary policy if any are announced immediately after the meetings. A press conference is held about 45 minutes after the meeting ends. A statement is read concerning their action -- or lack of it -- followed by a question and answer period. The ECB does not publish any minutes for its meetings. Why Do Investors Care? The European Central Bank determines interest rate policy at their Governing Council meetings. The Council is composed of the six members of the Executive Council and 12 presidents of member central banks (Bank of France, Bundesbank, etc). The Governing Council meets twice monthly (usually the first and third Thursdays of the month). Monetary policy issues are generally discussed only at the first meeting of the month. The European Central Bank has an established inflation ceiling of 2 percent. The ECB's measure of inflation is the harmonized index of consumer prices (HICP). Decisions are reached by consensus. No vote is taken. As in the United States, European market participants speculate about the possibility of an interest rate change at these meetings. If the outcome is different from expectations, the impact on European markets can be dramatic and far-reaching. The interest rates set by the ECB serves as a benchmark for all other rates in the eurozone. The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the stock market, while lower interest rates are bullish. Jobless Claims 08:30ET Consensus 537K Definition New unemployment claims are compiled weekly to show the number of individuals who filed for unemployment insurance for the first time. An increasing (decreasing) trend suggests a deteriorating (improving) labor market. The four-week moving average of new claims smoothes out weekly volatility. Why Do Investors Care? Jobless claims are an easy way to gauge the strength of the job market. The fewer people filing for unemployment benefits, the more have jobs, and that tells investors a great deal about the economy. Nearly every job comes with an income that gives a household spending power. Spending greases the wheels of the economy and keeps it growing, so a stronger job market generates a healthier economy. There's a downside to it, though. Unemployment claims, and therefore the number of job seekers, can fall to such a low level that businesses have a tough time finding new workers. They might have to pay overtime wages to current staff, use higher wages to lure people from other jobs, and in general spend more on labor costs because of a shortage of workers. This leads to wage inflation, which is bad news for the stock and bond markets. Federal Reserve officials are always on the look out for inflationary pressures. By tracking the number of jobless claims, investors can gain a sense of how tight, or how loose, the job market is. If wage inflation threatens, it's a good bet that interest rates will rise, bond and stock prices will fall, and the only investors in a good mood will be the ones who tracked jobless claims and adjusted their portfolios to anticipate these events. Just remember, the lower the number of unemployment claims, the stronger the job market, and vice versa. Factory Orders 14:00 ET Consensus -2.8% Definition Factory orders represent the dollar level of new orders for both durable and nondurable goods. This report gives more complete information than the advance durable goods report which is released one or two weeks earlier in the month. Why Do Investors Care? Investors want to keep their fingers on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more moderate growth which is less likely to cause inflationary pressures. By tracking economic data like factory orders, investors will know what the economic backdrop is for these markets and their portfolios. The orders data show how busy factories will be in coming months as manufacturers work to fill those orders. This report provides insight to the demand for not only hard goods such as refrigerators and cars, but nondurables such as cigarettes and apparel. In addition to new orders, analysts monitor unfilled orders, an indicator of the backlog in production. Shipments reveal current sales. Inventories give a handle on the strength of current and future production. All in all, this report tells investors what to expect from the manufacturing sector, a major component of the economy and therefore a major influence on their investments. EIA Natural Gas Report 10:35 ET Definition The Energy Information Administration (EIA) provides weekly information on natural gas stocks in underground storage for the U.S., and three regions of the country. The level of inventories help determine prices for natural gas products. Why Do Investors Care? Natural gas product prices are determined by supply and demand - just like any other good and service. During periods of strong economic growth, one would expect demand to be robust. If inventories are low, this will lead to increases in natural gas. If inventories are high and rising in a period of strong demand, prices may not need to increase at all, or as much. During a period of sluggish economic activity, demand for natural gas may not be as strong. If inventories are rising, this may push down oil prices. Friday December 5^th Employment Situation 08:30 ET Consensus NonFarm Payroll -300000 Consensus Average Hourly Earnings 0.2% Consensus Unemployment Rate – Level 6.7% Consensus Average Workweek – Level 33.6hrs Definition The employment situation is a set of labor market indicators. The unemployment rate measures the number of unemployed as a percentage of the labor force. Nonfarm payroll employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The average workweek reflects the number of hours worked in the nonfarm sector. Average hourly earnings reveal the basic hourly rate for major industries as indicated in nonfarm payrolls. (Bureau of Labor Statistics, U.S. Department of Labor) Why Do Investors Care? If ever there was an economic report that can move the markets, this is it! The anticipation on Wall Street each month is palpable, the reactions are dramatic, and the information for investors is invaluable. By digging just a little deeper than the headline unemployment rate, investors can take more strategic control of their portfolio and even take advantage of unique investment opportunities that often arise in the days surrounding this report. The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest. The employment statistics also provide insight on wage trends, and wage inflation is high on the list of enemies for the Federal Reserve. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus. By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process. Consumer Credit 15:00 ET Consensus $2.4B Definition The dollar value of consumer installment credit outstanding. Changes in consumer credit indicate the state of consumer finances and portend future spending patterns. Why Do Investors Care? Growth in consumer credit can hold positive or negative implications for the economy and markets. Economic activity is stimulated when consumers borrow within their means to buy cars and other major purchases. On the other hand, if consumers pile up too much debt relative to their income levels, they may have to stop spending on new goods and services just to pay off old debts. That could put a big dent in economic growth. The demand for credit also has a direct bearing on interest rates. If the demand to borrow money exceeds the supply of willing lenders, interest rates rise. If credit demand falls and many willing lenders are fighting for customers, they may offer lower interest rates to attract business. Financial market players focus less attention on this indicator because it is reported with a long lag relative to other consumer information. Long term investors who do pay attention to this report will have a greater understanding of consumer spending ability. This will give them a lead on investment alternatives. That's it for the economic calendar this week and for this outlook on what we can expect in the markets this week so use it wisely, and prosper… :-) Yours truly, Eric LeRiche http://www.InvestorRules.com Legal Notice The Publisher has strived to be as accurate and complete as possible in the creation of this report, notwithstanding the fact that he does not warrant or represent at any time that the contents within are accurate due to the rapidly changing nature of the Internet. The Publisher will not be responsible for any losses or damages of any kind incurred by the reader whether directly or indirectly arising from the use of the information found in this report. This report is not intended for use as a source of legal, business, accounting or financial advice. All readers are advised to seek services of competent professionals in legal, business, accounting, and finance field. No guarantees of income are made. 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