Quick Takes: Some Things I Am Thinking About


While the market rallied last week and continues to flirt with all-time highs, not surprisingly, volume was exceedingly light because of the July 4th holiday on Thursday. As Carl Swenlin noted:

” SPY has formed a bearish rising wedge, and the VIX penetrated the upper Bollinger Band, which is short-term bearish. The wedge looks particularly weak because price rose off the bottom of the wedge this week, but it failed to reach the top of the wedge before touching the bottom of the wedge again today.”

With a majority of short-term technical indicators extremely overbought, look for a correction next week. What will be important is that any correction does not fall below the early May highs.

Furthermore, with participation continuing to narrow, it continues to look like the August/September time frame for a larger corrective cycle is still in play.

Such corrective actions would coincide with emergence of risk factors from trade, to disappointment from the Fed, to a disappointing earnings cycle and rising recessionary indications.

This doesn’t mean sell everything and go to cash. It goes suggest carrying some hedges, a higher than normal level of cash, and a rotation intodefensive” positioning will likely remain prudent.


The employment number on Friday was strong as we anticipated. This puts the Federal Reserve in a more difficult position with respect to cutting rates in July. The markets initially sold off on the news but did manage to stage a bit of recovery by late afternoon as hope” remains high the Fed will cut rates regardless.

However, let’s take a look at a couple of “off the run” indicators about employment.

First, the Fed looks at the 3-month average of employment, still a lagging indication, to smooth out month to month variability. The chart is below:

Clearly, not only has the trend turned lower as of late, but has been weakening since 2015. This is commensurate with a late-stage economic expansion. However, the current weakness has been consistent with previous ebbs and flows of the business cycle and is not currently “weak” enough to suggest cutting rates in July is warranted.

Second, the “quality of jobs” continues to deteriorate as shown by the surge in “multiple part-time job holders.” Per ZeroHedge on Friday:

“While the headline payrolls number was stellar, coming in higher than even the most optimistic Wall Street forecast, one aspect of today’s jobs report that will likely become a major talking point for Democrats and other critics of the Trump economy, is that the number of multiple-jobholders soared from 7.855 million to 8.156 million, a monthly surge of 301,000 – the biggest since July 2018, and an indication that the jobs number was far weaker than the headline represents if one excludes all those workers who represented two jobs to the BLS’ various surveys.”

Lastly, the “birth-death adjustment” is, as we say in Texas, a load of S***!”

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