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T3’s Market Wrap: No Jobs, No Bears, No Problem!


Today's jobs report was a bit of a stinker.

And the bears have gone into hibernation for the winter.

To which the bulls say… no problem!

The S&P 500 hit a new all-time high today at 2739.73, with the Dow Jones Industrial Average and Nasdaq Composite also setting new records.

The Russell 2000 couldn't match them, but it's hard to complain.

We've had a great start to 2018, with 4 up days following a nonstop mega rally in 2017.

You can't have everything!

So let's dig in to today's big news.

The December nonfarm payrolls (NFP) report hit this morning and it disappointed.

The economy added 148,000 jobs, which is below the 190,000 consensus forecast.

The unemployment rate was in-line with expectations at 4.1%.

Average hourly earnings grew -0.3%, in-line with Wall Street's prediction. I guess that's a positive because earnings have been sluggish, and a miss would likely not have been taken well by the market.

One positive: manufacturing payrolls grew by 25,000, which was well ahead of estimates. On Wednesday, the Institute for Supply Management said 2017 was the strongest year for US manufacturing since 2004.

Gold, which has been ripping over the past few weeks, got a bid off the numbers, surging to $1323.90 before giving back some of the gains.

The jobs number disappointment drove weakness in bank stocks, which is no shocker since banks came a long, long way last year.

Plus, since economic data has been so strong lately, so it seems like expectations were high.

Just yesterday, the ADP employment number beat by a huge margin. There is little correlation between NFP and ADP, but still, the ADP report had traders pumped for today's NFP numbers.

Meanwhile, the rampant bullishness seen in late December is being cranked to a whole new level.

Now this is where things get nutty.

Last week, the AAII Sentiment Survey showed that 52.6% of individual investors were bullish. That was the highest level since November 13, 2014.

This week, it hit 59.8%.

We haven't seen individual investors this bullish since December 23, 2010!

Let's keep in mind that the AAII sentiment number was depressed for most of 2017, averaging just 35.1%, which was under the 38.5% long-term average.

For years, the goofy permabears that I love to troll have been saying that retail investors are “all in.”

Well, the permabears are finally correct!

Plus, traders are buying tons and tons of call options.

The CBOE Equity-Put Call ratio's latest reading is 0.5. This is way, way below the 0.654 long-term average.

The 10-day moving average is 0.556, also is extremely low on a historical basis.

And the 3-day moving average, which I use to measure very short-term bullishness, is 0.503. We haven't seen a 3-day moving average this low since December 9, 2016.

Of course, that's worked out great because the market just won't break down.

Are the bulls cruising for a bruising?

Are they getting too cocky, just before the inevitable drop?

It's hard to say.

It feels like it's been a decade since the last real pullback.

I'd look the numbers up, but what's the point?

We've been going up and up and up while volatility goes down and down and down.

If I knew when it would end… I wouldn't be writing this.

Have a great weekend.





Leave a Comment:

1 comment
Current Resident says January 6, 2018

The VIX breaking below 9 and staying there for more than an instant is also worth noting. It spiked to 11 last Friday on very little weakness. Imagine what would happen if the market slide 3%?

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