The vibe on the weekend's thread seemed to be a lot more market 'bullish' than 'bearish', from the jobs growth data and Fed comments that were seen on Friday night.
I'm still sticking to my bear thesis and only see this as a counter trend 'bull' rally within a 'bear' market.
Disagreements, differences and/or everyone believing that their view is the right view is what makes markets markets.
If everyone just believed the same thing then prices and values would all be perfectly alligned. (how boring...)
I'll outline my reasons below for why I still believe what I believe.
Feel free to debate them and/or just see the opposing view for a bull/bear market.
Strong jobs growth, low unemployment and wages growth all happen at the very end of an economic/business cycle, they are the perpetrators of downturns and recessions.
- Strong jobs growth causes low unemployment.
- Low unemployment causes wages to increase.
- Increased wages causes profit margins to fall.
- Jobs openings and job cuts happen when profit margins start to become squeezed.
- Less jobs = less spending.
- Less spending = less products being made.
- Less products being made = less people needed to be employed.
etc...
The world economies are already slowing so the above isn't going to help things along when it happens..
Although the Fed's comments on Friday night were somewhat 'bullish' for markets, the 'comments' aren't just about to automatically stop/halt the economy from declining...
I don't believe the Fed's comments and the halting of interest rates will have much of a material impact on the equity markets or the economy until QE is reintroduced in a meaningful way.
IMO by the time the Fed does come around to halting interest rates and/or adjusting their 'balance sheet reduction policy', it will already be too late as the 'snowballing' contraction phase will be in full effect by then.
I only see the markets 'stabilizing' somewhat, when QE is reintroduced in a meaningful way.
As all markets are related (some more than others) from globalization, perhaps another synchronised global recovery will be needed again for it to work...?
Big US economic data is due out tonight and will be closely watched.
The main one is the 'US ISM Non-manufacturing purchasing managers index (PMI).'
This data should help to better determine whether last week was a great 'buy the dip' moment or just another bull trap.
2 drawings I posted a few weeks ago should help illustrate my points above.
(20min delay)