Last month I reminded readers that, "...September is historically the worst month for the indices." Guess what? It still is, but this September turned out to be the best September for the markets in 71 years.

The next few days will tell an interesting story in terms of market technicals. Both the Dow and the S&P 500 are in similar positions to late April, having just broken out above the moving averages. This is usually a positive sign, but in April they failed to move higher after a few days and eventually retreated about 15% before the bulls could mount another attack in early July.

Since then, we've endured a 10% run up and another 7% retreat preceding this current 10% upward move. We are still a few percent below the April highs. Things feel a bit overheated at this point but can continue higher as long as investors are buying.

September's employment numbers indicate continued weakness in the jobs market, no matter how the politicians try and spin it. 95,000 jobs were lost as local and state governments shed positions at a higher-than-expected rate. Analysts expected a loss of only 8,000. The unemployment rate held steady at 9.6% as fewer, new workers joined or re-joined the workforce than expected.

Private-sector payrolls increased 64,000 in September, also below analysts' expectations of 85,000, and despite an upward revision in August's private sector payrolls from 67,000 to 93,000, the net job losses in July and August were revised lower by 15,000 for a total of 123,000 net jobs lost for the two months prior.

77,000 of this month's jobs lost were temporary census workers. There are only 5,000 left. The big surprise, other than fewer private-sector jobs created, was the large increase in other government layoffs. When state and local governments face budget shortfalls, they can't simply print more money like the Feds. They have no choice but to cut costs. While I must admit I always welcome a decrease in the size of government, when laid-off government workers can't be absorbed by the private sector that is not an improvement in the overall situation. We still haven't moved from "less bad" to "good."

The reported unemployment rate is likely to continue to rise well into next year, but that might not necessarily be a bad thing. As corporations, whose earnings are improving start to use some of their excess cash and begin hiring a lot of the workers who fell off the far end of unemployment benefits and hence, out of the workforce will start looking for jobs. This will drive the unemployment rate higher.

The more-important number to watch when that starts happening will be the actual number of private-sector jobs being created. If that can remain solidly above 150,000/month, we will be on the road to some meaningful recovery in the jobs market, regardless of the reported unemployment rate.

We can also look forward to a big shock early next year when the government completes its re-evaluation of the entire process by which employment is measured. Preliminary estimates are that total employment will be trimmed by 366,000. That means we've been counting 366,000 jobs all along that now the government is willing to admit really aren't there. That's not going to help matters.

The Fed is likely to continue its Quantitative Easing strategy, which is a more-palatable way of saying currency devaluation. Holding interest rates low, maintaining high levels of deficit government spending, and increasing, or at least trying to increase available credit is exactly what caused the Japanese economy to remain flat for an entire decade.

Japanese investors were borrowing money from Japanese banks at near zero percent and putting it in US and other countries banks when US CDs were yielding 5% and keeping the spread with virtually no risk. This was great for everyone but the Japanese because it meant all the money being taking out of the Japanese banks was leaving Japan and not being used to stimulate the local economy.

Now that interest rates everywhere are low, there are no foreign markets in which this process can be copied...yet. As soon as some central banks are willing to take the risk and let their rates climb a few points, they will see their banks flooded with foreign investments...great for their economy...not so great for everyone else's.

Whether or not Quantitative Easing is helping the US economy is debatable. It will not hurt us until foreign interest rates start to climb. Devaluing the dollar and holding rates low makes it easier for us to pay our debts, but it also makes our savings worth less and it makes it harder and harder for folks who rely on fixed-income investments to maintain their standard of living.

If banks aren't lending, lots of people are out of work and homeowners have no equity to pull from their homes, nobody is spending any money, jobs aren't created and the economy won't turn around or grow. Stockpiling hard assets like gold and other commodities also takes dollars out of the economy. If you're buying gold, you're not buying other things. Of course, the folks from whom you're buying gold have dollars, but they are worth less and less as devaluation continues. This drives the prices of gold and other commodities higher.

Bottom line is, there are a lot of moving parts in the economy and it is impossible for the Fed to influence a few of them without having an effect on all the others. The laws of unintended consequences are just as unwavering as those of supply and demand.

Back to the markets before we wrap up...for the first time since May 3^rd, the Dow closed above 11,000 today following the jobs report and a better-than-expected earnings report from Alcoa as they kicked off third-quarter earnings season. Improved earnings reports from more companies in the next few weeks could drive things a bit higher, but the pending elections may keep a damper on things.

By this time next month we'll have a pretty good idea how the next two years will look politically. How they'll look economically will be a much tougher thing to figure out, but we'll take it a day at a time and do our best to maintain financial peace of mind for our clients no matter what happens.