As an example to demonstrate the short sidedness of the stock market, look no further than today’s example. Just yesterday the stock market was falling in a panic reaction to the thought of a potential war in Ukraine. Then last night, Russian President Vladimir Putin dampened the concerns of imminent war by saying it is too early to assume an attack. The stock market hears this news this morning and pushes stocks to all-time highs, again…. As history shows, when everyone is buying regardless of other indicators, this is a time to be cautious.
Today is a quiet day in the news front, with markets preparing for three days of readings on jobs in the US. Tomorrow starts the action packed announcements with ADP’s report on new jobs, Thursday has weekly unemployment claims, and Friday has the mother of all reports, the BLS Jobs Report.
From a technical standpoint, bonds are now trading below the upward trend they forms the past week and a half, and the 10 year treasury note yield just broke above its 200 day moving average. Both of these are very negative indicators, and could lead to more rapid declines if the job figures are stronger than expected. Employment reports will set the tone for the direction of interest rates in the short term, so now is the time to protect yourself. Given the risks associated with these reports, we are going to have a locking bias.