A tough day for stock market bulls as the market sold off as volume jumped. First quarter productivity fell more than expected falling 3.1%. Sellers had control of the market all day long. The distribution day ahead of the May jobs report is not at all that surprising. What will be interesting is if we see any follow-through to the selling. We have yet to see this market follow-through on the upside will the downside be any different? We have placed some hedges, but we are still waiting on price confirmation before we begin to sell down our holdings. Tomorrow will be fun as the talking heads will trip all over themselves while we simply await our price signals. Today was not all that bad, but it was far from good. Stay tuned.
A few estimates have the jobs number around 226,000 after all the adjustments BLS makes. Who knows the real job number? The market certainly will react to the figure, but really there is just no good way for anyone to know how many jobs the economy has produced. What may be a bit more troublesome will be if the labor force continues to shrink with productivity shrinking. The Federal Reserve can help somewhat, but when your two biggest factors to economic growth slumping the Fed has its hands tied. If your labor force is not growing and productivity is shrinking how can the economy grow? Sure, we can have the fed pumping money into the system and it will help stocks. However, it will not do the economy much good. In the end, price is all that matters.
I’d love to report sentiment has changed a lot week over week, but it hasn’t. AAII Bulls ticked higher but only 27.3% up .3%. Bears ticked down a half of a point to 24.6%. Those who are neutral ticked higher to 48%. Same ole story from the AAII respondents. NAAIM exposure index ticked back above 70% on the week. At this point it is going to take quite a lot to push either of these sentiment surveys to sway one side or another.
Another thing to keep an eye on is the VIX. Most notably VXX and UVXY. Both have traded pretty tight over the past few trading sessions. We have not seen either of these trade this tight ever. Keep a close watch on these two.
It is important point to continue to exit a sound risk management strategy. Do not ignore exit signals and certainly do not forget how important position sizing is. Tomorrow is just another day. We will wait and see how the market reacts. Have a great weekend!
