Holding Pattern Continues As Market Awaits New Year

Before Thursday’s open, the Labor Department said weekly jobless claims fell to the lowest level since July 2008 which was a healthy sign for the ailing jobs market. Last week, jobless claims fell by -34,000 to 388,000, lower than the median forecast of 415,000 according to Bloomberg News. After the open, the Chicago PMI topped estimates and rose to 68.6 which bodes well for the ongoing economic recovery. At 10 AM EST, the National Association of Realtors (NAR) said their pending home sales index topped estimates and rose +3.5% to 92.2 from a downwardly revised 89.1 in October. Pending home sales indicate pending contracts that have yet to be closed. The market barely budged on the news which reiterates our thesis that the major averages are in a tight holding pattern until 2011. However, the recent 4-month rally in the major averages suggests the economy will continue to improve in the first half of 2011 and, barring some unforeseen event, the risk of a double dip recession is temporarily off the table. Normally, the stock market serves as a leading indicator and a great discounting mechanism for the economy.