02 Sep Locking bias
The cat and mouse game between the stock and bond markets is in play once more today.After suffering deep losses yesterday, the stock market has found some footing and is making a strong comeback.The level of volatility in the markets continues to be highly elevated.Generally speaking, this is not a good sign for the stock market.Dramatic swings are often a pre-curser to a bear market.A look back on the stock market charts the past couple months clearly shows a much higher than average change from one day to the next.Overall, the longer term investors have had minimal opportunities for growth, with the short term day traders having the greatest opportunity they have seen in long time.There is a lot of profit to be made on a daily basis, regardless of the direction the markets take.
We received an initial glimpse into the strength of the job market this morning when ADP released their estimate of new job creation for the month of August.It was estimated that 190,000 new jobs were created, which is below the market’s expectation of 210,000.In addition, July’s figure was revised lower by 8,000 down to 177,000.Although not a terrible reading, it certainly does not show the strength that the Fed was hoping for. At this point, they are looking for any justification to raise short term interest rates.A luke-warm warm job market is not strong enough to compel all voting members to push rates higher.
The bond charts are showing the potential for the begging of a downward channel.Therefore, we must be very careful at this point.Although we are still in the middle of a sideways channel, bonds are susceptible to a move lower.In light of this, we will maintain our locking bias.