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Friday, October 6, 2017

Market Alert - Pre-Market

Futures vs FV: SP -4.67; DJ -19.41; NASDAQ -15.59

Futures were flattish, a little down, a little up ahead of the Jobs Report. The report came out showing a negative non-farm print and futures actually improved. Then futures rolled over, and a half hour before the open they have not found a floor.

Yes, the jobs report was bad but frankly it was a known re the jobs. Other data inside the report looks pretty solid, to wit:

Wages: 0.5%, +2.9% year/year. Finally a bit of growth of late, but there are caveats below.

1.5M people had a job during the period but could not get to work

Participation rate: 63.1% vs 62.9%

With people wanting to get to work, companies needing work, no surprise wages were up.

Now, the wages are skewed: Food Services/Restaurants -105K jobs. If you take out the low end of the wage spectrum then average wages WILL rise. Thus this was not a clear win -- numbers and the ensuing headlines are very suspect.

Too much bullishness? 'The Economist' cover touts a bull market in all markets. Magazine covers have a history of indicating tops and bottoms though there have been a few 'perpetual bull' covers over the past several months and the market continues higher. It is an indication things are getting or are frothy.

Catalonia: Spain apologizes for the violence then implies the protestors had it coming because 'a court ruled' to remove the ballots. Well, that is kind of the point isn't it? The Catalons don't put much stock in Spanish courts.

Bonds: 2.393% versus 2.348%. Bonds selling some on the data despite the jobs miss -- wages, unemployment rate, participation rate are being viewed at the bond market versus the headline jobs miss.

EUR/USD: 1.1692 VERSUS 1.1710

USD/JPY: 113.29 VS 112.018

Oil: 49.74, -1.05. Bombing lower after an orderly pullback from resistance. Here we go again?

Gold: 1267.60, -5.60. Gold is acting as bonds, i.e. viewing the jobs report as a net stronger report given the internals.

Futures have now tried to bottom with 15 minutes left ahead of the bell. We see this as likely a session that starts lower and recovers. I know, it is a 3-day weekend, 'bad' news on top of that, but this is not really bad news. Of course it depends upon how the algos treat it. There is always that one report that triggers the turn.

Thursday the biotechs showed great winners and sharp losers. Watching to see if that action spreads to any other areas, e.g. chips, China stocks as that could be a tell.

Jon Johnson, Chief Market Strategist
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