Good Payroll Report

Between the Atlanta Fed and the payroll report, I'm admit to having some doubt about the weakness of the economy. I thought there would be clear signs of recession by now. Perhaps this is the last gasp. It would be very good news if it wasn't. A strong economy also doesn't really dent my bearish thesis because remember the 1970s. The Boomers + 1965 immigration act + feminism unleashed massive labor supply into the economy, wages soared with inflation and the stock market fell until an inflation-adjusted low in 1982. High inflation and high interest rates will kill financial assets and shift capital from Wall Street to Main Street. This is undoubtedly a good thing.

As for today, my main decision is whether to close weekly puts at the open because the market could rally back towards 3750 on the ES or hold because a move down could accelerate. I would reshort at 3750, that would be the plan barring a bigger rally. I don't expect a larger rally. While a move back up towards 3800 wouldn't kill my bearish outlook, it would surprise me a great deal.

For today's chart, here's the AUDJPY cross and then again with crude oil overlaid.

Keep an eye on HYG, LQD, mortgage REITs such as BXMT, Canadian banks and so on. The word for the day is follow through. Bears want to see new 52-week lows in these types of sectors because it will speak to rising financial and credit risk. If these sectors don't make new lows, it would raise the risk that the drop today, currently driven by Nasdaq and technology stocks, could be reversed.