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Last Friday, I wrote a note on US Employment that stirred the pots of the Depressionistas - it was titled "This Is BIG: US Employment Is Turning"...

Understanding that the peak of unemployment growth is measurable is what it is. Some people buy into this investment process, some people don't. For me, what happens on the margin is what matters to my macro model the most.

While monthly unemployment reports are more lagging economic indicators than anything else, the weekly jobless claims numbers are a much more concurrent indicator of quantifiable deltas.

One week certainly does not a TREND make, but this week's jobless report wasn't worse than last week's, and that is a point in and of itself. Initial jobless claims this morning fell from 674,000 last week to 654,000 this week. Most importantly, the weekly reading (which is subject to revisions) cracked the powerful upward momentum in the 4 week moving average (see chart below).

This morning I labeled the short squeeze in US Consumer Discretionary the Pain Trade. Today's early morning squeeze in the XLY (Discretionary ETF) isn't a marked-to-model price - its real - and the XLY is up another +4% today as a result. From mortgage rates, to y/y gas prices, to asset reflation, everything that matters to the American consumer has improved, on the margin.

For those who call measuring deltas silly, I hope you can remain in these short positions longer than those on the bid can remain solvent. This Pain Trade's fundamental underpinning continue to improve. Alas, hope, is not an investment process.

Keith R. McCullough
Chief Executive Officer

Claiming The Conch - employo