As we see below, the market tends to rally into the jobs report, which has led to an overbought condition three months in a row (lower pane). This latest bounce was the weakest, yet the casino is once again technically overbought:
For almost a decade straight, stocks rallied due to weak jobs and wages data. Because it meant more dopium from the Fed. So it's biblically ironic that stocks are now selling off on every jobs report, as the tax cut pushes the economy further towards "full employment". Whatever that means.
I'm ranted out for now, so instead I will ponder the two scenarios, both of which I assume will lead to the same thermonuclear outcome. I will leave to the lamestream media to ponder the thread-the-needle "Goldilocks" scenario assiduously, since that's all they will consider anyways.
First off, the last jobs report for November came out on December 7th and although the headline payroll number "missed" at 155k, wage growth was seen as running hot. Traders construed the report as being confirmation of December rate hike. And with the benefit of hindsight, it was.
Further rate hike confirmation will likely final pole axe the leveraged loan market:
Yield stocks (aka. "low vol") will also likely get monkey hammered:
Alternatively, a weaker than expected print will likely final implode the banks:
Oil (longs)
Treasury shorts
And carry traders
What we learn from above is that these two seemingly divergent scenarios are by no means mutually exclusive, they are mutually confirming. The Fed is pushing the economy towards recession using end-of-cycle data points as justification. What they've done every time since WWII.
We've run out of aspiring baristas for the CappuccinoConomy.
Delinquencies, consumer credit (blue)
Fed Funds rate (red):
