Wall Street traders await the first Friday of every month with bated breath.
Why? Because it’s Nonfarm Payrolls Day!
When the news is posted at 8:30 AM ET, the market often gyrates wildly in response. And today was no exception!
The blue line, representing the annual growth rate is still wallowing below the level reached right after the tax cut took effect. There’s no evidence of growth. And this data is nominal.
Wages are growing at 3% annually. That means that 3% inflation is included in the withholding tax collections. In real terms, after inflation, the growth rate was minus 4% in March, which is the effect of the tax cut. But today that has dropped to -5%. That’s a decline of 1 percentage point in the growth rate since March. That’s a period in which the BLS is telling us that the economy added around a million jobs. It’s a period in which the tax cut should have been stimulating growth.
Something doesn’t add up here. The tax data suggests that jobs growth at the very least has slowed since March. Meanwhile the headlines suggest that all is hunky dory on the jobs front. All the while, the Fed keeps tightening the screws.
With Fresh Jobs Data At Hand, It’s Time to Buy Puts
I think that reality will soon rear its ugly head. Traders and investors will have a nasty surprise and the market will have an accident. The change in sentiment will be swift and violent, and so will the market reaction.
I will watch the technical indicators for you, for signs that that change is under way. This week’s tape action certainly suggest that doubts are creeping in.
Back on August 20 I had suggested buying a few SPY calls to take advantage of any upside, while we sit mostly in cash.
I think the time has come to remove those hedges.
The time to buy puts may be at hand.
I’ll keep you posted.