Any optimism contained in the Fed statement apparently didn't spread to New York University Professor Nouriel Roubini, who spoke at the World Economic Forum in Davos following the FOMC release.

The White House was quick to cheer the rosy employment numbers from the Labor Department earlier this month. And the market responded with a rally. But something doesn't add up.

In the wake of one of the most volatile years ever for stocks, safety will be a key theme among investors in 2012.  

Financials have clearly driven this rally. And it makes sense - this rally is being built on a bailout designed to help banks.

One thing that seems to be missing is the timetable for Greek default. It would be good to know exactly when the Euro-banks have to book the losses.

Don't let the financial pundits capitalize on your fears and concerns! They want you to take all of your personal wealth and buy gold bullion.

Despite the threats that the EU debt crisis may spill over and affect U.S. GDP growth, economic data has come in pretty good lately.

Tuesday's late reversal had investors worried that a Hope Rally was fading quickly. But we should note that stock price moves always have a lot to do with expectations and anticipation.

Not only are we failing to get any traction to employment due to the stagnant economy, companies that have screwed up are continuing to shed payroll to get costs in line with their revenues, companies like Bank of America (NYSE:BAC) and Cisco (Nasdaq:CSCO).

Government debt is likely the biggest problem for the stock market these days.

The market did not do much yesterday. The indices started the day moving higher, but around noon they fell back and closed in the red.

The decline was entirely expected and needed. Many indices had moved up 6% in two days, so it was natural that they consolidated yesterday, especially with no news.

Now that an actual, much-needed, $450 billion American jobs bill is here, it will be interesting to see how it's treated in Congress.

President Obama's upcoming jobs proposal just might be the final piece of the puzzle to guarantee a huge upswing in gold prices and silver prices.

Oh Standard & Poor's, you've got to be kidding. Apparently the ratings agency is still giving Triple-A ratings to securities backed by subprime loans.

"S&P is poised to provide AAA grades to 59 percent of Springleaf Mortgage Loan Trust 2011-1, a set of bonds tied to $497 million lent to homeowners with below-average credit scores and almost no equity in their properties," the article says.

S&P seems to have forgotten that these mortgage-backed securities defaulted to the point that it nearly brought the world's financial system down. Of course, banks held too many of them, and had leveraged them too much, but S&P was complicit.

But, I guess when you're getting paid -- approximately $1.67 billion in bond rating fees last year -- anything goes.

So, let me start today by offering my apologies if you had difficulty getting Daily Profit or any of our other letters yesterday. The Wyatt Investment Research offices in Vermont were inaccessible. Check out this incredible photo - tweeted by WPTZ's Jill Glavan yesterday.

That's exit 11 off highway I-89 to Richmond, Vermont. We're used to getting around on skis, snowshoes and snowmobiles. But boats? Not so much.

I'm grateful that none of my staff suffered any major damage or injury, and I certainly hope Daily Profit readers were spared anything more than inconvenience.

Now, let's get back to business.

President Obama's upcoming jobs proposal just might be the final piece of the puzzle to guarantee a huge upswing in gold prices and silver prices.

Why? Well here's what we know so far:

1. He plans on spending money to create more jobs.
2. He plans on tackling the deficit.

What do we know about his first goal...

The market bears are back. In a kamikaze attack, the bears threw everything they had against the market yesterday - and won. The decline started eight days ago, but in yesterday's plummet there was no shelter and if you owned stock you lost money - it's that simple.

Declining stocks to advancing stocks were about 19 to 1. Down volume to up volume (some of which was us) was an incredible and jaw dropping 1.8 billion to 20 million.

Going into the day, I expected a nice leisurely decline to Monday's low, then stabilization, maybe even a bounce back to 1280. I figured the indices were oversold, and near a reliable support zone. Wrong.

The market stabilized yesterday as a long term support zone was tested. The bulls protected 1250, but the countertrend move higher did not look enthusiastic. This was despite the fact that volume raced higher again on Wednesday and total volume is way above average this week.

The high volume could turn out to be a good thing if the bulls can protect 1250 over the next week or so. But if the bulls lose that support, those additional buyers from earlier in the week will quickly look to cut their losses. And by cutting those losses, there will be another stint of selling that would push the market lower, perhaps by another 10%.

Financial markets like money. When the Fed was pumping cash in to the system via QE2, stocks moved relentlessly higher.

Yesterday's vicious sell-off was a snapshot of a market worried about a lack of money.

The debt deal passed in Congress yesterday calls for $2.4 trillion in government spending cuts over the next 10 years. We looked at some of the impact of reduced government spending yesterday...

The debt deal in Congress is as good as passed. And yet stocks sold off hard yesterday. And today isn't shaping up to be much better. The reason, in my opinion, has to do with government spending cuts, austerity and what that means for economic growth.

Yesterday, I asked the question "where will new demand come from?" And I recently received a reader question that hits the same theme...

Earnings season continued at a torrid pace, with large cap stocks beating on revenues and/or earnings per share. The EU finalized a bailout plan, and reports seem encouraging that Congress will reach a budget deal soon.

We've had to suffer through a perfect storm of bad news since May. Now, we seem to be getting a perfect storm of good news. Even the most recent housing construction data was better than expected.

Unemployment, however, continues to lag. And as we've discussed at length, there's no reason to expect hiring to improve significantly, especially with spending cuts coming at the federal level.

China's got a heck of a nerve. Yesterday, CNN reported that the Chinese government's State Administration of Foreign Exchange published the following statement on its website:

"We hope the U.S. government will take responsible policies and measures to boost global financial market confidence and respect and protect the interests and investors..."

And even went so far as to say that the debt issue is a "... reflection of the credibility of the U.S. government..."

Now, I know none of us are happy with the way Congress and the administration has approached our debt issues so far. But China's sitting in its own glass house.

When it comes to conspiracy theories, and the theorists who theorize them, I definitely fall into the armchair variety. Sure, conspiracy theories can be fun (like The Da Vinci Code), and sometimes there may even be a little meat in the conspiracy bone. For instance, there's no evidence to say that former Treasury Secretary Henry Paulson let Lehman Brothers fail because he didn't like CEO Richard Fuld. But after engineering a buyout for Bear Stearns, I feel strongly that Paulson got personal.

And we can't be sure that the Chicago Merc raised margin requirements on silver to protect big banks short positions. But it makes some sense...

So, I couldn't help but get a little conspiratorial after Friday's dismal jobs numbers. Not one economist got even close to the real number (18K). And after the ADP Payroll number came out, estimates for the government's NonFarm payrolls went up.

Now, we know pretty much any government statistic is suspect. They are usually calculated to give a rosy picture. And the NonFarm Payroll number is especially variable because, as a Bloomberg article notes:

The Labor Department, which houses the Bureau of Labor Statistics, adjusts the employment figures each month to account for things like teachers falling off school payrolls in June and workers finding temporary employment with retailers during the December holiday season.

"There was a big adjustment this month," Labor Department Chief Economist Betsey Stevenson said on a conference call with reporters. "It's an art and a science doing seasonal adjustments and it's really hard to predict."

At a time when we've already seen weak economic data for a couple months, wouldn't it be a good time to be less aggressive with seasonal adjustments? Or does the weak employment number support the Obama administrations budget battles in Congress? It seems to me that austerity is a tougher sell when it could easily push the economy into recession.

High-unemployment continues to plague the U.S. economy.

According to the Department of Labor, the official unemployment rate recently increased to 9.1%. It's tough to imagine the illusion of a recovery extending much longer when millions of people are unemployed.

And it doesn't take a market expert to absorb all of the aforementioned economic data and come to the conclusion that the U.S. economy is in trouble.

So the question as a small cap investor or any investor for that matter is - how can we profit from high-unemployment and a struggling economy.

The S&P 500 is about to conclude its 6^th straight week of declines. Amazingly, there haven’t been 6 straight down weeks since 2002. Even the financial crisis didn’t give us that many consecutive weeks with losses.

Of course, the losses came a lot swifter in 2008 and 2009. So far, this correction has only taken around 70 points off the S&P 500. That’s around 5.5%.

There is a budding divergence between economic data and corporate forecasts. We’ve seen a stark deterioration of economic data across the board. Manufacturing surveys have weakened, auto sales were down in May and then, of course, we got the icing on the cake with the pitiful employment numbers last week.

 

Economists and strategists have been falling all over each other as they lower their 2011 GDP estimates. (Of course, Daily Profit readers had a heads up, as we noted the change in the Fed’s outlook after the last FOMC meeting.)

As expected, today's Nonfarm Payroll number was just as bad as the ADP Payroll indicated it might be. Expectations were that 165,000 jobs were added in May. The reality is that we got only 54,000 jobs.

Soft patch, indeed.

The economy has been adding an average of 220,000 jobs for three months running. 54,000 is a big miss, big enough to push the unemployment rate up to 9.1%.

When Fed Chief Ben Bernanke told us that he believed inflation was “transitory”, he was saying that commodity prices were higher due to Fed monetary policy.

 

When Bernanke went on to say that he would let QE2 end and not immediately fire up the QE3 engine, because the risks of further inflation were not being offset by gains in employment.

 

Put simply, Bernanke said inflation was all (or at least mostly) his fault.

The "slowing growth" theme we've been discussing has now worked its way into the headlines. Today's ADP report that the private sector added a less than expected 179,000 jobs in April is being billed as a sign that the recovery is not moving as fast as we'd like.

Today's oil inventory report is also being interpreted as measure of slowing growth. Crude inventories rose 3.2 million barrels last week, higher than expected.

The market continued its sideways move yesterday and banged-up against 1335 resistance for most of the afternoon. Over the past three sessions the market has been stuck in a four point range and

In a speech yesterday, Fed Chief Ben Bernanke made two very important statements. First, he said that he believes the inflation we are experiencing due to higher commodity prices is temporary. Second, he said he could be wrong.

The specific quote goes like this:

“We have to monitor inflation and inflation expectations extremely closely because if my assumptions prove not to be correct, then we would certainly have to respond to that and ensure that we maintain price stability...”

The market exploded higher yesterday. Nothing can stop the bulls, it's almost like North Africa, Japan and the Middle East does not exist.  Of course, we know better. And we also know that earnings

Stocks are bouncing higher today after some hefty declines this week. The S&P 500 flirted with some support areas around 1,300. There was a virtual consensus that stocks were overbought and needed a pullback, and we got one.

 

The question is: was that enough to relieve some of the pressure and give stocks room to rally higher?

 

I suspect we will see a period of consolidation before stocks make a decisive move. Investors appear to be more focused on the crosscurrents of economic data and trends.

Starting last week, we saw some of the market's biggest momentum trades sell-off on basically positive earnings reports. I'm referring to Apple (Nasdaq:AAPL), VMWare (NYSE:VMW), F5 Networks (Nasdaq:FFIV) and many of the other tech companies that are helping companies lower costs or are associated with the surge in handheld gadgetry.

But last night, Qualcomm (Nasdq:QCOM) reported good numbers and the stock is actually higher. NetFlix (Nasdaq:NFLX), too. Though not in the same sector, Caterpillar (NYSE:CAT) is also up after good numbers.

Could we be seeing a shift from the "sell first" mentality that emerged last week?

The New Unemployment Claims number is usually one of the last indicators to start improving after a recession. But once unemployment claims start to fall, job growth and strong economic expansion are never far behind.

And today, New Unemployment Claims finally broke through the critical 400,000 level for the first time in 2 ½ years.

Santa's come early for the bulls. I can't think of any better gift than today's ADP payroll number. It's probably tough to miss the news that private sector payrolls rose 93,000 in November, according to payroll services company ADP. That bodes well for Friday's November Nonfarm Payroll number.

One of the big drags on the economy and stock market has been unemployment. And frankly, it will continue to be, perhaps for years. The Fed's best guess about unemployment has the rate holding above 7% into 2013.

Welcome back! I hope everyone had a most excellent and relaxing Thanksgiving holiday.

Let’s get started with a discussion on retail sales. As we know, GDP growth came in a bit stronger than expected for the third quarter, largely because of stronger consumer spending growth

The good vibes from the GM IPO and the bailout potential for Ireland took the S&P 500 back above support/resistance at 1,192. We'll see how long the good vibes last.

Despite yesterday's strong move, the stock market still feels "heavy" to me. That's not to say I think a big decline is imminent. But the way higher is going to be a slow grind, unless we get some data to sway the mood.

Technology can fix anything: even the Federal government's deficit. At least, that's what the Technology CEO Council told White House officials yesterday. The council, headed by IBM (NYSE:IBM) CEO Sam Palmisano said investments in efficiency technology could save the U.S. government $1 trillion over the next 10 years.

Of course, the meeting was basically just a sales call. And seeing how much loot the government's been doling out, I wonder what took them so long.

Everyone agrees that the stock market likes cheap money and low interest rates. Because when you can borrow cheaply, the risk of stocks is easier to stomach. And when interest rates on bonds are at or below inflation rates, there's no incentive to hold bonds.

So one might think the promise from the Fed that more quantitative easing is in the pipeline would be seen as good news. But the stock market's response to the Fed's policy statement from Tuesday hasn't looked like a ringing endorsement.

Of course, the S&P 500 has run into another significant resistance point at 1,150. And the 9.5% September rally has pushed stocks into overbought territory. A pullback for prices is reasonable under those conditions.

Today is Fed day. That's when we will get the latest policy announcement and economic outlook from the Federal Open Market Committee (FOMC). There are 8 of these meetings a year, and the Fed uses these meetings to decide whether to change interest rates, among other things.

FOMC have been market-moving events for a while now, as the U.S. economy has struggled.

When the Fed has good news for the markets, its job is easy. But days like today require some careful comments.

The S&P 500 is at a very interesting spot. On Monday, September 13, it gapped up and ran above resistance at 1,120. It's dipped below that level every day since. But the bulls have rallied and closed the S&P 500 above 1,120 every day.

The S&P 500 is consolidating recent gains above an important support/resistance point.

This is exactly the kind of action I like to see. And the trading floor guys and the talking heads on CNBC are all buzzing that this rally might have legs, these gains might stick.

The weak economic recovery has created a very volatile stock market. Wide swings in investor sentiment give us "it's getting better" rallies and "double-dip recession" sell-offs.

We've enjoyed one of those "it's getting better" rallies that's boosted the S&P 500 85 points, or 8%, from 1,040 on August 31 to a 1,125 close yesterday. The move was supported by improving employment data, better than expected retail sales and spending numbers and as surprise jump in manufacturing activity.

But these days, investors don't maintain their convictions, or stock positions, for long. And economic data is having a hard time building on its momentum.

I know - I'm supposed to talk about gold or oil or coal again today. That's what you were promised as a reader of this publication.

I hope you'll forgive me, but today's missive has little to do with commodities.

I read an article that just can not go unmentioned. It's either the funniest and best written nod to George Orwell I've ever seen, or it's a frightening representation of the world we live in.

Before I go on, you should take a look for yourself - it truly must be seen to be believed.