Non-Farm, A Review

BarroMetrics Views: Non-Farm, A Review

On the surface, Friday’s Non-Farm Payrolls ought to have been good for the US dollar, and perhaps, even the S&P:

  • the headline number showed 252,000 new jobs. This was well above consensus expectations.
  • The unemployment rate dropped to 5.6% from November’s 5.8%. We have not seen this unemployment rate since 2008.

Given these numbers, why did the US dollar tank?

If we look beneath the surface, there were clouds on the sunny horizon:

  1. the average hourly earnings were down 2%.
  2. The long-term unemployment is at historical highs, with one-third not having a job in the past two years.
  3. Men not working is three times the number in 1960.
  4. Finally, the number who have dropped out from looking for a job, or have settled for a part-time job is at historical highs.

Given the above, it’s no wonder that the US dollar headed south. The question now is, whether the S&P will follow the dollar?

Figure 3 may provide the answer, this is the Market Delta chart of the E-mini nearest month futures.

We see that the selling pressure produces a lower number than the previous two of moves, and the selling pressure on January 5. This suggests to me that we should test the 2018 level. That test will probably be successful, and we should see an up move today. If the move up does occur, I shall be looking at the buying pressure to see whether or not that picks up as the S&P heads towards 2088.

The rationale for the up move? There may not be as much pressure on the FED to raise rates as the headline numbers suggest.

If I am wrong, and the market proceeds to head south, I shall be interested in the selling pressure to see whether or not it suggests we shall be testing the 1972 level.

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FIGURE 1 S&P Cash

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FIGURE 2 S&P Cash

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FIGURE ES NFM

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