“Don’t fight the Fed” has been the market mantra for as long as no doubt many a trader can remember. I.e., you may see nothing but dread when you look out across the macro horizon, but if the Fed’s easing (cutting interest rates and purchasing bonds) buy stocks, with both fists!

Now, wouldn’t it therefore make sense to, say, sell stocks with equal passion if/when the Fed promises to hike rates and sell bonds?

Well, okay, we’re officially in a bear market, but only being down 13% or 19% (SP500 and Nasdaq Comp respectively) — notably off the depths — year to date does not a serious bear market make. And when you consider the chorus coming from the Fed after last week’s meeting, essentially chastising “the market” with their you’re-not taking-us-seriously refrain, heck, you’d think that stocks would, at a minimum, roll right back over and test the bear market low (which is more than 10% lower from here)!

So what gives?

Well, think about it; I wasn’t kidding when I suggested that today’s market player has truly known none other than the “don’t fight the Fed” mantra. So, given that a market-friendly Fed has been their career-long experience, they simply can’t bring themselves to believe that the institution that loved them so very much over all those years would in-effect turn on them, to any seriously-painful degree… It’s simply not — given their personal paradigms — within the realm of possibility.

So then, what gives is either (as depicted above) a fundamental belief that, come hell or high inflation, the Fed will forever have the equity market’s back, or, it’s that market actors have grown so smart over the years (and/or the Fed so dumb), that they know the economy better than does the Fed. 

I.e., in the latter context, the market sees a notable economic, and, thus, inflation, slowdown coming sooner than later that will catch the Fed off-guard and have them pivoting to a dovish stance earlier than they themselves currently anticipate.

Well, while I do sympathize with the forever-friendly-Fed narrative, as I’ve stated ad nauseum on the video updates, they simply will not come to the rescue at these levels, not with inflation still a mountaintop above their 2% target. With regard to the notion that the market is smarter than the Fed, well, in the longer-term, I sympathize there as well. In fact, save for the shocking data release I’ll present in a second, indicators of late have been indeed flashing recession on the very near-term time horizon. Although the following definitely pours some cold water on those indications.

“WOW” is the word to describe this morning’s jobs report!! I’ll just borrow the details from Peter Boockvar’s morning note: 

Asian equities rallied overnight, with 14 of the 16 markets we track closing higher.

Europe, in response to this morning’s US jobs report, with 18 of the 19 bourses trading down, is rolling over as I type.

US stocks are down as well to start the session: Dow down 129 points (0.41%), SP500 down 0.66%, SP500 Equal Weight down 0.55%, Nasdaq 100 down 1.21%, Nasdaq Comp down 1.07%, Russell 2000 down 0.65.

The VIX sits at 21.82, up 1.77%.

Oil futures are up 0.15%, gold’s down 1.15%, silver’s down 2.29, copper futures are up 1.21% and the ag complex (DBA) is down 0.62%.

The 10-year treasury is down (yield up) and the dollar is down 0.14%.

Among our 35 core positions (excluding options hedges, cash and short-term bond ETF), 5 — oil services stocks, energy companies, base metals futures, financial stocks and carbon credits — are in the green so far this morning. The losers are being led lower by silver, treasury bonds, Sweden equities, AMD and uranium miners.