Morning Note: Know (the mind of) your opponent…

All eyes will be on the June jobs print tomorrow, and, if you’re a stock market bull, be careful what you wish for.

So what does that mean? Well… it means that in all likelihood really good news right here will not be greeted warmly by the stock market, particularly tech stocks — as they occupy the longest duration (sensitive to interest rates) space among the major sectors these days. 

In other words, a jobs market that’s heating up will put more heat on the Fed to do what they are oh so desperate not to (in fact — in any consequential sense — refusing to) do, which is to tighten monetary conditions via raising interest rates and/or — other than cutting back the utterly unnecessary direct support for the housing market (via mortgage purchases) — reducing their aggressive asset purchases. 

Bottom line, we’re in the throes of one of those periods where, on balance, good news is bad news — as stocks, for the moment, are trading on central bank policy — and that’s pretty much the long and the short of it.

Asian stocks put in a mixed performance overnight, with 8 of the 16 markets we track closing lower.

Europe, on the other hand, is green across the board, with all 19 bourses we follow up, as I type.

U.S. major averages are mostly in the green as well this morning: Dow up 62 points (0.18%), SP500 up 0.26%, SP500 Equal Weight up 0.50%, Nasdaq 100 down 0.08%, Nasdaq Comp up 0.04%, Russell 2000 up 0.75%.

The VIX (SP500 implied volatility) is down 1.39%. VXN (Nasdaq 100 i.v.) is down 0.65%.

Oil futures are up 2.18% (looks like OPEC will go easy on production output going forward), gold’s up 0.36%, silver’s down 0.21%, copper futures are down 0.22% and the ag complex is up 0.64%.

The 10-year treasury is down (yield up) and the dollar is down 0.02%.

Led by energy stocks, MP (rare earth miner), ALB (lithium miner), KRBN (carbon credits), AT&T and bank stocks — but dragged by solar stocks, Latin American equities, base metals futures, Mexican equities and TIP (inflation protected treasuries) — our core mix is up 0.12% to start the day.

Lasse Heje Pederson in Efficiently Inefficient reminds us of the one truism that should translate to exercise ahead of every trade:

“…you need to understand who is taking the other side of your trade and why. If you are making money more often than not, what is motivating others to trade the other way, and will they continue to do so in the future? Remember that for every buyer, there is a seller, so someone is always taking the other side of your trades, and if you do not understand the economics of the trade, they may.”

Thanks for reading!

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