Posting ahead of Employment Report

There is the important announcement of employment report on Friday. Everyone is very positive. In a community chat, I saw lots of optimism. All betting that it will be a positive number.

I look at the whole scenario and decided to post the following on Thurs:

I will bet that the unemployment numbers are up.

Stocks were hitting their resistance. It has been a great July with the market up more than 10%. VIX is reaching support around 22. Lots of complacency and optimism with no fear. Any bad news should send the market down.

Predicting the market is a risky business. If I can get more than 50% right, I congratulate myself. I will be making money because of my hedge with options.

On the fundamental side:

1. Conference Board Confidentce Index dropped to the lowest reading in 4 months of 50.4.

2.Empire Manufacturing Index of New Area activity plummeted to a 19 months low of 5.1

3. Philadelphia Fed Manufacturing Index dropped to 11 month low of 5.1 in Jul y

4. Long term unemployment (6 months or more out of work ) is 2x as bad as the worst recession since 1948 and getting worse.

5. Fed are talking of quantitative easing and keeping interest rates low

6. Baltic Dry Index dropped for 36 straight days - the longest streak since 1995

7. ECRI weekly leading index falling out of bed hitting a -10.7 - worst in 14 months. Each time it hits <-10 a recession follows without fail.

8. So far this year 103 more banks had failed added to the 148 that failed last year. Banks are reporting a 7 percent decrease

Considering the above, how to stay positive. I am hedging all my long positions and increasing my shorts.

I am not overly pessimistic. At least, I know the earnings are good and Asia is doing well. But with the high expectations, SPY facing resistance and complacency, I fully expect stock to correct short term with the DOW going below 10,000. Longer term after this correction, the stock market should resume its climb.