Does Dow 10k work with unemployment 10.2%? Chart of the Day compares job loss rates

What a choppy week as the markets managed to advance despite many volatile moves! That's classic for a correction unfortunately - so it's one of the signs that this is a "wave 2" correction preceding another wave down. Tony Caldaro marked wave 2 onto his SPX hourly chart today so we'll look at what he's saying in his updates soon. For now, readers know I've also been referring to this as a right shoulder of a head and shoulders pattern - and isn't it classic the Dow made its followthrough today back to Dow 10k. But is that justified given the dismal jobs number this morning? In addition to hitting 10.2 percent, there are folks pointing out that the "real" unemployment figure is higher. Is the markets' rise justified?

It's true that equities markets are a leading indicator, so the rally could precede the worst of the unemployment situation. However, I think it's way too soon to say that equities are signaling that the worst is over. Our technical methods point to equities due to make another wave down. Whether or not that means a complete retest of the March lows, it's a warning as we head into the winter season that things can get worse. Many markets are in a pattern that's poised to roll lower, including the banks, financials and real estate. That's a mix that doesn't necessarily bode well for employment or the economy. Consumers have started tightening their belts and we don't see that ending anytime soon. Even if the worst is over, employment can lag. But if the worst isn't over - if there's another round of financial scare with real estate dropping and the banks and financials falling back with squeezed credit markets - the bear market can drag on for much longer, such as into 2011-2014.

Let's take a look at what "Chart of the Day" has to share on this issue:

Chart of the Day - Unemployment rate above 10% for only the second time since WWII
November 6, 2009

Today, the Labor Department reported that the unemployment rate increased to 10.2% -- a 26-year high. For some perspective on the current state of the labor market, today's chart illustrates the unemployment rate since 1948. As today's chart illustrates, today's move above the 10% threshold marks only the second time such a move has occurred during the post-World War II era. It is also worth noting that the unemployment rate has tended to peak shortly after the end of the recession. Following the previous two recessions, however, the unemployment rate kept rising for many months following the beginning of an economic "expansion."

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