How will September’s jobs data be interpreted?  Until this week, the data was consistently surprising on the upside suggesting an economy expanding around a 2.5% to 2.75% pace.  However earlier in the week both the ISM Manufacturing Index and the ISM Non-manufacturing Index disappointed by a wide margin causing the recessionary narrative to go ballistic.

Treasuries rallied and equities sank.  The question at hand is whether or not the markets have over reacted?

All major indices have violated their 50 and 100 day moving averages and are now around their 200 day moving averages.  Speaking of which the 200 day moving average is flat for 14 months.  In other words it is around the same level today as it was on August 1, 2018.

This is an abnormality.

There are several interpretations of the 14 month flat 200 day moving average lines.  Some are suggesting the markets are very efficient trading in a tight range but with intense volatility beneath surface.

Others are suggesting a major breakdown is about to occur.  While others are suggesting the inverse.  As with everything, there are numerous articles, reports, etc., to confirm one’s preconceived confirmation bias.

I will continue to believe that money will ultimately gravitate to those sectors that offer the greatest potential gain with the least amount of risk, companies whose profitability is accelerating at pace greater than the market is suggesting and whose shares are mispriced.

Earnings season is about to commence and Bloomberg writes that earnings growth for the value shares will again outpace earnings gains for growth shares.  Value shares are trading at the sharpest discount to growth since at least 2000.

What are the odds the moving average lines will remain flat for the foreseeable future but a viscous rotation amongst sectors will continue?  This is the scenario expressed by the late Jack Bogle who commented the markets may remain flat for the next 10 years.

Economists are expecting a 146k and 130k increase in non-farm and private sector payrolls, respectively, a 3.7% unemployment rate, a 0.3% increase in average hourly earnings, a 34.4 hour work week and a 63.2% labor participation rate.

To write the obvious the markets will take its que from the data.  Bloomberg writes globally over $1 trillion has evaporated since last week, partially the result of the hyper recessionary narrative.

Speaking of which, yesterday equities recovered from over a 1% decline to close about 1% higher as some believe the data increases the odds of another interest rate cut by year end.

Last night the foreign markets were mixed.  London was up 0.40%,  Paris up 0.14% and Frankfurt down 0.06%.  China was down 1.06%, Japan up 0.32%  and Hang Sang down 1.11%.

The Dow should open nominally lower but this could change radically given the significance of the 8:30 data.  The 10-year is unchanged at 1.53%.


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