• According to the Department of Labor, the figure for seasonally-adjusted initial jobless claims for the week ended February 11 was 348,000, a decrease of 13,000 from the prior week's revised figure. The four-week average of 365,250, a decrease of more than 11,000 from the prior month. The overall trend of jobless claims continues to move lower. About 3.42 million people continue to collect unemployment insurance, a decrease of 100,000 from the prior week.
• Non-farm payroll employment increased by a robust 243,000 in January, with 257,000 gains in the private sector offset by 14,000 losses in government jobs. The majority of the gains came in professional and business services, leisure and hospitality, and manufacturing. An additional 60,000 jobs were added via revisions to November and December. The total number of workers counted as unemployed fell to 12.8 million, helping move the unemployment rate down to 8.3%. The more comprehensive U-6 rate, which was as high as 16.7% last June, actually inched down to 15.1% from 15.2% last month.
• A slightly lower 5.5 million people continued to be unemployed longer than 27 weeks. The seasonally adjusted number of people who could only find part-time work rose to 8.2 million and the number of marginally attached workers rose to 2.8 million. The number of people holding multiple jobs fell to 6.83 million. The average hourly wages for blue collar workers rose to $19.62 while the average work week crept up to 33.8 hours. So it's a mixed picture as more people are finding work, but as more people begin looking for work, the number of people on the fringe still can't find work. Still, things are getting better.
• The Congressional Budget Office (CBO) estimated that on a net present value basis, the Treasury reported a federal budget deficit of $27 billion for January and $349 billion for the first four months of fiscal 2012, which was about $70 billion less than the same period a year ago. The current estimate for the full year is $1.1 trillion vs. $1.3 trillion from 2011, assuming no further economic legislation. If the payroll tax holiday is extended for the entire year, the budget deficit will grow even more.
• The Census Bureau reported that the U.S. trade deficit of goods and services was $48.8 billion in December, up from the revised figure in November, but still within the range of the rest of the year.
• The Census Bureau reported that privately owned housing starts rose 1.5% in January, after falling a bit in December, and was 9.9% higher than a year ago, to a seasonally adjusted annual rate of 699,000 units. These results continue to fluctuate wildly from month to month, so a reliable trend is not yet in evidence. New building permits were roughly flat from the prior month but still up 19% from the year before. Like starts, the number of permits are fluctuating from month to month, with no clear trend.
• The National Association of Homebuilders/Wells Fargo Confidence Index in February rose for the fifth straight month, hitting 29, up from 25 in January. This is the highest level the index has hit in four years as optimism grows for a recovery in the moribund and still fragile housing market.
• The Census Bureau reported that on a seasonally adjusted annualized basis, sales of new homes in December fell 2.2%, and at 307,000 units, sales were 7.3% lower than a year ago. The estimate of homes for sale was only 157,000, which represents 6.1 months at the current rate of sales. The median sales price of $210,300 marked the lowest price since October 2010, and was well below the 12-month moving average price of $223,433. New home sales are likely to continue to suffer until the glut of existing homes for sale at much lower prices are wiped out.
• The National Association of Realtors reported that on a seasonally adjusted annualized basis, sales of existing homes were 5.0% higher in December (the third straight monthly increase, and four of the last five months) to 4.61 million units, and were 3.6% higher than a year ago. The estimate of 2.4 million homes for sale means there's an estimated 6.2 months supply on the market. The median sales price of $164,500 is roughly equal to the 12-month average of $164,733. With mortgage rates at historically low levels, and prices as cheap as they've been for years, this is a great time to buy a home if you have enough cash for a large down payment on a conforming loan, good credit and can find someone willing to sell at distressed prices. If you want a jumbo mortgage, you're basically out of luck because most banks won't underwrite those loans anymore.
• The S&P/Case-Shiller Home Price 10-city index, which uses a three-month moving average to track the value of home prices across the US, slipped for the third straight month in November. This is not surprising considering the falling home prices reported by the Census Bureau and the National Association of Realtors. My guess is that December will also be down.
• The Institute for Supply Management (ISM) index of manufacturing activity was 54.1 in January. This marks 30 consecutive months of expansion in the manufacturing sector, and a slight improvement over the prior month. The ISM index of non-manufacturing activity was 56.8. This marks growth in the service sector for 25 consecutive months. These numbers demonstrate that business is still growing, slowly but steadily, and moving further and further away from a risk of recession.
• The Conference Board reported that it's index of Leading Economic Indicators increased by 0.4% in December, a small increase versus the prior month. Says Ataman Ozyildirim, economist at The Conference Board: "The gain was widespread among the leading indicators, suggesting economic conditions should improve in early 2012."
• According to the Bureau of Economic Analysis, the "advance" estimate of GDP growth for Q4 was 2.8%. This was up from the weak 1.8% in Q3, 1.3% in Q2 and and 0.4% in Q1. This compares with 2.3% in Q4, 2.5% in Q3, 3.8% in Q2 and 3.9% in Q1 of 2010. Putting a damper on this "better" news is that much of the growth can be attributed to inventory building, which is temporary. Still, the evidence suggests that (at least for now) we have avoided the "double-dip recession".
• The Federal Reserve reported that in November the amount of outstanding consumer credit was $2.5th, up 0.8% from the prior month. This followed a slightly higher increase in November which was the largest month-over-month increase in total outstanding consumer credit since November 2007. Consumer credit is now growing at a 9.25% annual rate, demonstrating clearly that after years of retrenching, the American consumer has cut back on saving and is spending again.
• According to the Census Bureau, retail trade and food service sales were up a modest 0.4% in January, which was better than December, and were 5.8% higher than a year ago. General merchandise and food and beverage stores led the way this month. Eventually, the retail sales figures will have to be more robust in order to really give a boost to the economy.
• The Federal Reserve reported that in December the (revised) rate of growth in the supply of M-2 (a broader view of money) slowed a bit from prior months, but continued to move higher, up 11.4% over the prior six months. The supply of M-1 (the most narrow definition of money), on the other hand, rose 23.5% over the same six months. Unfortunately, too much of this money is sitting in the reserves at your local bank or on the balance sheets of corporations like Apple and Microsoft, as well as the Fed itself. This none-too-subtle and dangerous policy of monetary expansion isn't having enough real influence on the economy. But sooner or later, this will explode into massive inflation.
• After rising for the final two months of 2011, the Conference Board's Consumer Confidence Index fell 61.1 in January. A reading above 90 indicates the economy is solid, while 100 or above indicates strong growth. Says Lynn Franco, Director of The Conference Board Consumer Research Center: "Consumer Confidence retreated in January, after large back-to-back gains in the final two months of 2011. Consumers' assessment of current business and labor market conditions turned more downbeat and is back to November 2011 levels. Regarding the short-term outlook, consumers are more upbeat about employment, but less optimistic about business conditions and their income prospects. Recent increases in gasoline prices may have consumers feeling a little less confident this month."
• According to the FDIC, 7 banks failed in January, plus another 2 through February 14. 11 banks failed last January and 7 had failed by this point in February. So hopefully there will be an improvement this year over the 90 banks that failed in 2011, which was a big improvement over the record 160 banks that were either closed or merged into healthier banks in 2010, and 140 in 2009. By comparison, only 26 failed in 2008 and a paltry 3 in 2007.

Trends To Watch

In 2011 the relative value of the dollar was the most important factor determining the direction of the stock market. When the dollar went up, the market went down, and vice versa. The big increase in the value of the greenback in the second half of last year had a particularly deleterious effect on the relative values of hard assets like gold, copper and iron ore. Last month I suggested that after such a big rise, "one might expect the dollar to take a breather." Almost right on cue, the dollar slid a bit. And it shouldn't be a surprise to note that the decline in the dollar had the inverse effect on the stock market. This will be a very important relationship to watch for the rest of the year.

In December I wrote that the big year-end selloff in the price of gold likely offered a profitable buying opportunity. Since then, the price has increased about $200 per ounce. So what happens next? The chart is inconclusive. There have been three straight lower highs, which would suggest the current high of $1,765 will hold and the price will roll over to make a lower low, which would bring the price below $1,500. On the other hand, the current price is higher than both moving averages, which is bullish. My bet is that the price will trade in a tight range for a while before breaking up and above resistance.

To put the movement in the price of gold into greater perspective, I'm showing you a three-year picture below. The decline in December violated the trendline which wasn't good. But the subsequent rally brought the price right back to trend and above the moving averages. Again, we'll have to wait and see which way it heads next.

After a terrible fourth quarter, the price of silver has begun to show signs of life, as demonstrated in the chart below. It would be very bullish should the price of silver move above resistance just under $36 (the green line). There is a pretty firm floor just north of $26.

The price of copper continues to rise, giving credence to the belief that the global economy is improving. The price recently broke above resistance at around $3.75 and is trading slightly above both moving averages. This is very bullish. The next resistance would come in around $4.20.

The price of West Texas Crude had exploded higher over the past four months, rising back to above $100/barrel. The price is now bullishly above both moving averages and at the high end of the trading range with resistance at $105. A little profit-taking and consolidation is normal after such a brief and powerful rally. It will be very important for the bulls for the price to remain above $90/barrel (red line). At these levels, the oil companies are wildly profitable. I'd like to see prices hold at this level rather than go much higher because higher prices will have a deleterious effect on the economy, which would eventually drive oil prices lower.

I've made no secret of my bearishness on the financial sector since early 2008, and until recently, that was a very good stance to take. The tide has begun to turn in the last few months. As you can see, there has been a strong surge since the end of November, after an initial rally in October fizzled. The index is now trading right at its resistance level around $14.50 and above both moving averages. I likely won't change my position until the ECU crisis is resolved and until our own housing crisis is behind us.

I have been bearish on the housing sector since 2007, and like the financial sector, it saved my clients a lot of money to avoid housing stocks. I admit I'm completely amazed by the 71% gain in this index in only give months. While builder sentiment has improved, the number of homes being sold and the prices that they've sold for don't justify the gains in this index. So should investors believe the numbers or the pictures? I'm still sticking with the numbers because if the numbers don't improve, this sector could be headed for a big fall.

After taking a beating in the second half of last year, the equity markets of the developed international countries have begun to stage a bit of a rally. After remaining above key support around 46, the index has gained about 15% so far this year. We can't go to sleep on this one. The slightest bad news could easily send this index plunging again. It's hard to imagine any sustained rally until the ECU is on more stable footing. But there is a whiff of optimism in the air. The next resistance comes in around 55. If Greece fully signs off on a new austerity plan without sending its citizens into complete revolt, this index could move much higher and test the 2011 high around 65.

The chart for the emerging markets index, which shouldn't be correlated with the developed markets, looks remarkably similar to the chart above. The emerging markets don't have the same crushing debt burdens, and enjoy a much higher GDP growth rate. To me, this suggests that given some global economic stability, there could be some explosive gains coming from the emerging markets region. Technically, the chart looks better now that the index has risen past both moving averages and has formed an almost perfect inverse "head and shoulders" formation. It won't take much for the final "shoulder" to complete and let the index punch through resistance at 48.

This could be the most important chart I include every month. Like a broken record, I wrote for six months last year that the weakness in the Shanghai Index made me very nervous because of China's importance to the world economy. Indeed, you could make that case that as China goes, so goes much of the rest of the world. In July the index fell below its moving averages and a year old support level (green line). Then after testing it in early October, the index then sunk below major support (red line) in December to a level not seen since the Lehman failure when it bottomed out at 1,665. In December I also wrote that RSI was extremely oversold which suggested that a short-term pop should coming up. Fortunately, as you can see below, the SSEC has indeed popped a bit, and moved above the 200-day moving average. Still, there's a long way to go before I'll call a recovery. But moving back above 2,700 would be extremely bullish.

Last month I said the market was "mildly bullish." Now, I'd call it very bullish (check out the extremely oversold RSI), which as a contrary indicator, suggests that  that a correction could be coming sometime soon. Although I don't know how severe that correction might be, my intuition suggests it will be mild.

This chart, which shows that over 80% (almost 90% recently) of stocks traded on the New York Stock Exchange are currently trading above their 50-day moving average. This too suggests a bit of over-exuberance which could result in a correction sometime soon.

Finally we have the somewhat busy chart of the "Fear Index". Amazingly, after all the political, economic and meteorological crises that we endured last year, and with the ongoing debt crisis hanging over everything, the VIX remains relatively complacent. Personally, I'm enjoying the relative stability in the market and I don't look forward to the agita caused by greater volatility.