Bottom-Fishing

Construction on new homes in the US fell 14% in December to a seasonally adjusted annual rate of 1.01 million, the slowest monthly building pace in more than 16 years, the Commerce Department reported Thursday. Housing starts for single-family homes in the West fell 16% to the lowest level since the data were first collected in 1959. Building permits fell 8% in December to a seasonally adjusted annual rate of 1.07 million, the lowest since May 1993. For all of 2007, housing starts fell 25% to 1.35 million, the lowest annual total since 1993. The question is whether one sector can bring down the economy. The property side is just playing out its excesses, to me, any rebound is and will be temporary in nature.

Then we had another conflicting signal, the seasonally adjusted number of people filing initial claims for state unemployment benefits in the US in the week ended Jan. 12 fell to 301,000, down 21,000, to mark the lowest level seen since Sept. 22. Initial claims have now fallen for three consecutive weeks. The four-week average of new claims fell by 11,750 to 328,500 -- the lowest level since late October. The previous week's level of initial jobless claims was unrevised at 322,000.The four-week average is considered a better indicator of the health of the nation's labor market because it smoothes out one-time events such as holidays or strikes, analysts say.Compared with the same time last year, initial claims are up about 5%, while continuing claims are up about 11%. Its too early read too much positives into the job claims improvement. On a year on year basis claims are still higher.

Initial claims ranging from about 300,000 to 325,000 are consistent with healthy job growth, economists say. Readings consistently higher than 350,000 would signal significant weakening in the labor market. Hence market watchers are still neutral on the jobs data.

From the chat room, I often see comments that the Dow futures are positive and hence indicate recovery. Futures during Asia time zone or after market closes in the US should not be read in such a one-dimensional way. Players of futures largely involve traders who were already short or long certain stocks. Depending on their risk appetite, they could lock in gains, take some losses, or hedge their shorts - with so many variables, it would be very shallow to regard premarket futures as a directional guide with confidence.

My prognosis, we are in for a difficult period, not just a difficult week, with or without an election.