Fed’s policy trajectory is tied to global recovery from SoberLook. [biiwii comment: Agreed, in that there is little pressure implied on the Fed from global and ‘strong dollar’ perspectives. The pressure would come (IMO) from any desire to keep up appearances considering that ZIRP appears to the average person to be stranger and stranger given the ramping economy. Anyway, SL as usual has the grounded and sober details].
The data on the U.S. unemployment rate have been getting progressively better over recent months, either because of or in spite of the government’s efforts, depending on one’s viewpoint. And if this week’s chart is to be believed, then the data should continue to get better over the next several months.
‘Jobs’ came in at 248,000 vs. estimates of 220,000 and unemployment rate to 5.9%. Clicking the graphic yields the MarketWatch article.
The stock market is dutifully rising to test some breakdowns, as we noted to be likely in an update for subscribers yesterday. A key to what the market does at those test levels will be in how the market interprets the data’s effect on policy making which, as we well know, has been causal and supportive of the bull market every step of the way.
Theoretically, in a normal market we have reached escape velocity, where the economy’s fundamentals alone can carry the day. Notice I wrote ‘normal’? Is this a normal market?
The Fed is looking mighty suspect holding ZIRP for going on 6 years now. Then again, as long as there are no signs of inflation they have an implied free license to keep on keepin’ on. Interesting to say the least.
I have spent some time rummaging around the internet in light of yesterday’s hard ‘up’ in the stock market. There are intense debates going on about whether this is a ‘V’ shaped reversal as Richard Ross (a cool dude I have met previously) thinks, or a bounce prior to new lows.
My view? New lows in February prior to a bottom that could possibly be the launch pad to new highs out around mid-year. That is of course subject to the current bounce proving to be only that, a bounce.
I prefer to look under the hood more than to try to out guess nominal charts. One market leader, the BKX-SPX ratio, is still intact.
Another leader has been the barometer of the will to speculate as represented by the HYG (junk bonds) LQD (investment grade) ratio. This has made a mini breakdown.
What say we let the market decide what is up next? I have a sneaky suspicion that ‘jobs’ is going to come in okay, although the forecast as noted at MarketWatch seems to be a bit of a high bar at 190,000.
For now I am sticking with the bounce prior to a drop again in February and then rebound into mid-year scenario. Subject to incoming data of course, beginning in 5…4…3…2…
 Lame Payrolls +113,000 vs. expected +190,000 (prev. 74,000).
NFTRH 264, well rounded and well grounded financial market analysis, is out now…
It’s 20 pages that I think sums up the ‘mini me’ cyclical situation compared to 2000’s maxi. We discuss risks and potentials (dependent upon time frames) to the whole ball of wax. For instance, this is a risk to US stock market players right now from a contrary perspective…
But there is so much more to a macro process that is grinding along through its time, which appears to be waning. It is really quite interesting to write about and indeed needs to become a lifestyle for people who are serious about succeeding. The graphic above is a short term data point. What about the bigger cycle?
There are no predictions; just work. You have got to be a geek with this market.
Total nonfarm payroll employment increased by 169,000 in August, and
the unemployment rate was little changed at 7.3 percent, the U.S.
Bureau of Labor Statistics reported today. Employment rose in retail
trade and health care but declined in information.