Friday, January 04, 2008

The Silver Lining On This Morning's Jobs Report

The market is getting hit on this morning's weak jobs report. December payrolls grew just 18k (vs. +70k consensus), although last month's figures were revised higher. But these figures are volatile from month-to-month, so extapolating today's figures into the future could be a mistake.

The 10-year yield plunged on the news, taking out recent lows and hitting 3.83%. So the concern about the economy is elevated. I think the silver lining of today's data is that it should get the Fed to act quicker and stronger than before. If they think job growth is at risk, they should step up their efforts.

They need to stop worrying so much about inflation. Slower economic growth combined with a credit crunch are both deflationary events.

Asian markets were up across the board overnight, except for Japan which tumbled -4.0% on its own economic worries. I'm sure the BoJ doesn't want the Yen to appreciate anymore, and could intervene.

Investor anxiety is spiking this morning as well. The ARMS Index hit an extreme reading of 3.00, and the CBOE put/call ratio opened at 1.78. Those figures are likely signs that pessimism has peaked in the short-term, and should help the market find a bottom shortly.

I will be looking to put some money to work today or Monday, as I think a bounce is in the cards. For now, I want to buy weakness and sell strength until the market can prove that it has the strength to break out of this multi-month trading range.


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