The October Jobs Report

Flashing Red Lights

The Friday October Jobs Report:  FLASHING RED LIGHTS

Sometimes in the stock market it isn’t even about the data released on a company or the economy, but rather the order with which the data comes out that matters most.  By that I mean, you can have bad news come out when the market is in rally mode and it gets ignored, explained away or over shadowed, and vice versa.  In this context, the $TLT (long bond proxy) was down about 7% in a straight line heading into October 21st and the Fed blinked with the WSJ whisperer saying the Fed wanted an off ramp to the 75 bps hikes to lower hikes ahead.  It isn’t as if inflation updates had changed to the positive, but the Fed and other central banks saw the stress developing in the system so they called TO (time out).

Now, the Fed decision this week and the tea leave reading will happen before the October jobs report on Friday.  This creates the order of events issue I mention above. To some extent, the market now expects the Fed to try and signal 50 bps in December but be data dependent.  Will this cause us to rally further?  No idea.  The nuances and market participant positioning seems almost as important as the message.  In fact, we heard Friday that a massive put spread at 3900 S&P 500 exists and expires Monday that created massive gamma buying by broker dealers last week. Good luck knowing if that was artificial to the rally or if it helped change the narrative.  I truly do not know.  But I do know ALL market participants should be aware of the mathematical quirk in how BLS will report the October jobs number that could possibly change the narrative completely, again!  Let’s discuss.