As if the European crisis wasn’t enough. Yesterday’s unemployment report was a stark reminder that our own economy is by no means out of the woods yet. U.S. employers added only 69,000 jobs to their payrolls, far less than the 150,000 that most economists projected. The unemployment rate also ticked up to 8.2%. This sent the markets into a tailspin with the Dow Jones Industrial Average (chart) losing 274.88 points, the Nasdaq (chart) -79.86, the S&P 500 (chart) -32.29 and the Russell 2000 (chart) -24.40 points. Couple yesterday’s tape with the 6%+ decline for the key indices in May, and you have almost a 10% correction in a month and a day!

Too far too fast? Not so sure? Unless the governments and central banks unite over this weekend and come up with some sort of an additional stimulus plan, we could be in for further downward pressure on Monday and the rest of next week. I am not suggesting that the central banks should step in every time we have a market meltdown, but with the incessant debt crisis in Europe and now our own economy faltering, there may not be another alternative.

As an investor/trader in this type of market environment, one must exercise extreme caution. For me it would be easy to say “well the markets have now officially broken down and broke through key technical support levels, let’s go short” and probably that strategy would work. However, I have seen this movie before in whereas technically and fundamentally speaking equities appear to heading a lot lower. Then you wake up one morning and indeed the governments from around the world come up with a blanket plan to place a floor under the markets and then the massive rally begins.

Point being this, we live in a very different world today and what appears to be undervalued or for that matter overvalued in the marketplace, it really doesn’t matter. So long as you have accommodative Fed policies, the markets will trade according to the central bank(s) guidelines, not on fundamentals. Good luck to all.

Have a great weekend 🙂

~George