The big jobs number this morning would normally strike fear into the hearts of many asset classes, because it signifies a potential early withdrawal of monetary stimulus. We saw the typical spasms and gyrations post-announcement as money was reshuffled, and now going forward we have to effectively evaluate if the news was already priced in. Equities have been at highs (many floating above their upper Bollinger Bands), the dollar has been a rocket, commodities have been unloved, and anything precious metals related has been decimated. So we have to ask:
Is this jobs number already priced into the market?
We won’t know immediately, but if we see equities sell off (or stagnate), the dollar drop, bonds catch a bid, and commodities awaken, then there is a good chance that we will have to dislocate our brains from our buy/sell finger and do the opposite of what has worked so far in 2013. The market doesn’t have to make sense, and often times our intellect is the biggest obstacle in our path to making money. Let the price action alone dictate where you allocate your capital.
We continue to hold contrarian long positions in GLD and GDX with a target at the 50 MA, and those that are long SPY are keeping their positions small and stops close. With the dollar strength and bond weakness this morning, two markets that are closely watched for policy decisions, we could be coming to the first crossroads of 2013.
Good trading all.
Steve Chapman, TRI