In this “bizarro world,” a soft payroll report might be what the market needs to help the market recover
There is no offer on the market. We have a market that went from being overbought to slightly oversold two weeks ago and it’s still failing to recover. This is bearish. There has been a notable buyer strike over the last two weeks with only one notable up day in the last 11 (August 25 when the S&P 500 gained almost 60 points). Boy, could the stock market use a weak jobs report. There is certainly nothing that will noticeably change the mood today: there are more Covid lockdowns in China. Nvidia announced that the US government has imposed new licensing requirements for some of its advanced chips, affecting sales to China. The dollar remains at a 20-year high. The interest rate on 10-year government bonds is well over 3%. Federal Reserve officials are determined to keep interest rates high longer, even if a recession ensues. It’s no wonder stocks are in another downtrend. Several sectors are in notable downtrends. I would particularly like to single out healthcare, including pharmaceuticals (the Invesco Dynamic Pharmaceuticals ETF, PJP) and even the Dow Industrials, which is down nearly 8% in just over two weeks. Surprisingly, gold and silver are in a remarkable downtrend. SLV, the iShares SilverTrust, is at a two-year low. Formerly high-flying “thematic technology” ETFs including robotics ( BOTZ ), video games ( HERO , GAMR ) are also in downtrends. Even oil (a proxy for inflation) below $90 isn’t helping the bullish cause: it’s weaker, but not weak enough to give a clear sign of further downside. Bears, of course, claim that the oil decline is a sign that recession concerns are growing louder and supply problems are being overcome. With the ADP report and stronger than expected job offers, buyers see no reason to crane their necks. We need a soft jobs report. I’m looking for 300,000 but when I poll traders most say it would probably take 200,000 or so to get a positive reaction from the market. It’s what UBS’s Mark Haefele calls “Bizarro World,” where bad news is good news.
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