Well, we've never seen this one before, have we? The sterling market was all geared up for hints of a possible BOE rate move, only to get #Carneyed yet again, this time by hand-wringing over the level of the currency. Doh! On the plus side, Macro Man now harbors ambitions that one of the Macro Boys might one day be the Guv'nor of the Old Lady, as they are the only people he's ever observed who expend as much effort to do nothing as the current holder of the role.
Speaking of doing nothing, the Fed's decision point for September draws ever nearer, and today of course marks the penultimate payroll release before next month's FOMC. Dennis Lockhart's comments earlier this week about the tilt in the burden of proof were certainly interesting, as he has generally struck Macro Man as being one of the more evidence-based, non-dogmatic members of the Fed.
In any event, today's figure is one of a vanishingly few that can or will tilt the balance for September in one direction or another. As such, Macro Man would be pretty surprised if there weren't a big reaction, regardless of outcome. In the game of "rate hike musical chairs", the empty seats are disappearing quickly, so even an on-the screws number of say 212k/5.3% may force people to pick a side.
From Macro Man's perspective, his model looks for a growth in private payrolls of 208k, pretty much bang on the consensus. For what it's worth (probably not much), over the past twelve months his model has underestimated the monthly payroll rise by an average of 27k- though with only seven underestimations (versus five over-estimations.)
The implications of the number for the dollar and rates would appear to be fairly linear, though with August illiquidity it would be unwise to rule anything out. The same holds true for equities, where despite the braying of the buy-the-dip crowd, Spooz have gone nowhere in aggregate for a long time- indeed all year. As the chart below illustrates, selling the rally has proven to be just as effective a mean-reversion trade as buying the dip (albeit all within a corset-tight 5% range over the last six months); it's curious (and perhaps telling), therefore, that the few notable bears/short-sellers in the comments section seem to come in for a lot of stick- despite being distinctly less smug than the dip-buyers.
Either way, in Spooz at least, the tight ranges mean that you're playing for peanuts- and the only way to make proper dough doing that is by ramping up the size. History is replete with examples of that sort of strategy ending badly- the only question is whether it happens today, next month, or some time further in the (distant?) future.
Speaking of doing nothing, the Fed's decision point for September draws ever nearer, and today of course marks the penultimate payroll release before next month's FOMC. Dennis Lockhart's comments earlier this week about the tilt in the burden of proof were certainly interesting, as he has generally struck Macro Man as being one of the more evidence-based, non-dogmatic members of the Fed.
In any event, today's figure is one of a vanishingly few that can or will tilt the balance for September in one direction or another. As such, Macro Man would be pretty surprised if there weren't a big reaction, regardless of outcome. In the game of "rate hike musical chairs", the empty seats are disappearing quickly, so even an on-the screws number of say 212k/5.3% may force people to pick a side.
From Macro Man's perspective, his model looks for a growth in private payrolls of 208k, pretty much bang on the consensus. For what it's worth (probably not much), over the past twelve months his model has underestimated the monthly payroll rise by an average of 27k- though with only seven underestimations (versus five over-estimations.)
Either way, in Spooz at least, the tight ranges mean that you're playing for peanuts- and the only way to make proper dough doing that is by ramping up the size. History is replete with examples of that sort of strategy ending badly- the only question is whether it happens today, next month, or some time further in the (distant?) future.
19 comments
Click here for commentsTold ya macro son..I will reach up into the sky and grab everything he gave me and punch it straight through you f##kin heart c##t.
ReplyOk -im calling that as amps in the glasses and fake mustache.
ReplyAgreed, Amps losing the plot again.
ReplyLOL. Someone is getting warmed up for payrolls.
ReplyAnother NFP Friday it is then, always fun. I wonder how weak the number has to be for the FED to reschedule the anticipated September hike?
"so even an on-the screws number of say 212k/5.3% may force people to pick a side"
ReplySpot on! :)
Crude:
Replyhttp://blog.kimblechartingsolutions.com/wp-content/uploads/2015/08/crudeoilhitsdualresistanceaug6.jpg
You can now add biotech to the list of energy, materials, industriasl, semis, transports, to drop ~10% this year without $SPX coming close.
ReplySomeone is holding that sucker up.
" As such, Macro Man would be pretty surprised if there weren't a big reaction, regardless of outcome."
ReplyThere is not much reaction really after the NFP as there is just no surprise to the consensus. The Fed has been taking so much time to signal what they want to do, and everybody is watching the Sept rate hike. Only a surprising NFP may probably bring some more volatility. Before that I guess we will keep seeing things to move in a tight range.
I haven't seen LB in a bit, I'm wondering if he is on an Ashes-related blowout celebration bender ;-)
Reply- Whammer
Just got a pic of LB's current location!
Replyhttp://www.campcedarledge.com/starlahammock.jpg
great job report, Fed clearly wants to hike aaaaaaaaaaaand....TLT bulldozes ahead.
ReplyH&S in the IBB. How this market isnt lower I dont know. From one manager I spoke with he thinks its just the momo crowd. Buy what working and sell what isnt now matter the price. Dow Jone Tematic Index does a good job of describing this behaviour Link
ReplyFor me this market is just wackey D
https://www.youtube.com/watch?v=qKyFWL4UH-4
Ok, so lets compile:
Reply-USD initially looked cheerful for the assumed lift-off clearance (if this isn't it after "centrist" Lockhart comment then what is...), but now it looks depressed and ready to jump off the skyscraper
-UST's don't seem to give a flying youknowwhat
-Mr equity looks a little bit worried
-Precious metals look happy
-EM's except Russian and China look worried
-Oil and base metals look worried
So it looks kind of 3-3 on the market participant voting machine here. If one gives Mr. Bond the benefit of doubt and assigns the commodity depression as a motive for his actions today, and assume yields would otherwise be going up without oil and others sliding, then it would tilt to 4-2 in favor of the tightening symptoms. If so, one might then assume that dollar bull is still on, just a short term breather for Bucky, PM's before the next plunge, commodities will remain depressed for a while longer and Mr. Bond (the short one) will eventually start playing ball in the coming weeks. And although it's possible USD started the second phase of "Buy the rumor and sell the news" it's hard to believe why we would be there just yet. Unless concensus is taking Sep as a given already.
I'm just going to make an (un)educated guess and name it after the everything-out-of-whack LB's silly season, nothing more, nothing less and assume the aforementioned scenario. But in case I'm wrong I've been adding some TLT and REITs anyway. VNQ up. It's just completely out of whack.
Yawn.... (stretches in hammock as he awakes). Did I miss NFP Bingo? I did? Wow. It wasn't in fact a very interesting data release, although given seasonality one can argue that it was actually fairly strong. I didn't miss much, then?
ReplyIn fact, LB was just following The August Rules.
1) Never trade on a Friday in August.
2) Never trade on a Jobs Friday in August.
3) Never leave the hammock in August unless there is a compelling reason to do so.
4) Never get caught with any sizable position on a thin trading day in August.
5) Never invite ladies into the hammock unless they are experienced in hammock-sharing.
Looking at the action in retrospect, we guess there were too many people short Treasuries yesterday morning. Once all that positioning was squared away, we can resume normal market action on Monday. UST buying doesn't make a lot of sense to us here, we'll wait for someone big to decide they are out of position and trigger capitulation selling.
This is an expiration week, and the pattern for summer expiration weeks is that Mr Shorty gets crushed by vol sellers. FM and his ilk of JBTFDers will likely be looking at recent under-perfomers for the opportunity to ride a face-ripper. Spoos and USDJPY have been in lock step so we will probably see the USD stay firm, especially if Fedspeak continues to suggest a September to Remember. [I know, I know, what a fuss over 25 bps]. So no respite for hard-hit commodities and EMs yet.
Greece is looking at an important payment deadline, and we are guessing that Mangler has finally hogtied Schäuble and has sent Athens a truck full of €, so that the Greeks can unload it for a few minutes and then reload it again into the truck that goes back to Frankfurt. Once this is passed, it will be deemed that it is OK to buy Greek govies again, and we will see a massive rally in naughty peripheral debt, which will eventually bleed into equities. So we are getting constructive on European stocks here, for a trade.
The Ashes was compelling viewing, even if some of it was in the corner of one's laptop, while at work. There was a small celebration here early this morning, but we didn't leave the hammock... some very positive cricket from England. Splendid.
via @FZucchi
ReplyCrude Update $CL_F $XLE $XOP $OIH
Next week could see the printing of daily TD Buy Setup, TD Sequential Countdown Buy, and weekly TD Buy Setup. In other words, multiple counts/timeframes suggest that the sellers may be getting exhausted for the time being. This does NOT mean that oil / energy is printing a double-bottom at the March lows. The fact that the daily and weekly Buy Setups are completing (as opposed to cancelling) reinforces that the sellers are in control. At a minimum, energy bulls will need to see completion of a daily Sell Setup before having something to hang their hats on. A completed daily Sell Setup would provide some evidence that the that buyers have a modicum of strength behind them. Absent that, the Sell exhaustion should offer a pause/countertrend on the path to much lower prices.
China: Growth Engine Or Caboose?
ReplyIn a supply-constrained world, current account surpluses are a good thing because they provide savings to the rest of the world which can be transformed into investment. In contrast, in a demand-constrained world of the sort we live in, current account surpluses are a bad thing
since they siphon off demand from the rest of the world. From this perspective, China – and
to an even greater extent, Germany – are the cabooses of the global economy rather than the engines...
hmm interesting, but not so much for commodities...
Greek govies catching a bid today and European stocks following suit, as we had suggested might be possible this week. Also, the predictable squeeze in Spoos and a less predictable one in metals and emerging markets as USD changes direction for the 37th time in recent weeks. Not sure if the Fedspeak by Fischer had anything to do with it whatever, USD and USTs were both a bit over-bought at the end of last week.
ReplyHere are some highlights of the summer at Hammock Capital, btw:
In Defense of Hammocks
This second image, however, is not LB, and it's not the kind of hammock that LB had in mind...
Not Taken At Hammock Capital
and on the topic of Greece, nothing like a good crisis in the periphery to offer low rates of borrowing in the core, eh?
ReplyGermany Gains From Low Rates As a Result of Greek Crisis