A View from the Edge Ahead of Non-Farm Payrolls and a New Trade

Short sellers got caught off guard...Again

In case you’ve missed it, the U.S. Ten Year Note yield (TNX) has broken below 4.3% today in response to a weaker than expected JOLTS number, where the number of job openings came in below expectations.  The lower than expected number suggests a slowing in the labor market which the market is interpreting as a sign that this Friday’s non-farm payrolls number may be softer than expected and push the Fed towards lowering interest rates sooner than later.

Of course, no one knows what Friday’s number will be, but in this market, all we have is today.  If you want to register your opinion on the jobs number, you can vote here. The poll closes on 6/6/24.

As the price chart shows, not only is TNX below 4.3%, for the first time since February, but it is also below the 200-day moving average.  Of course, a stronger than expected jobs number will likely push yields back above both important levels.  But for now, it’s encouraging to see this development.

The bullish action in bonds has delivered the Nasdaq 100 (NDX) into the hands of what looks to be an aggressive short covering rally, as illustrated by the rise in the ADI line.  The OBV line is still flattish, but by no means negative.  Given the new highs on the index, I expect a bit of follow through ahead of the employment report, although the market is likely to be very quiet on Thursday.  For more on how to spot short squeeze setups, go here.

For its part the S&P 500 (SPX) also moved to a new high, also pushed higher by short sellers.  In contrast to NDX, the OBV line for SPX is moving more aggressively to the up side, which means that the buying is more intense in this index.

As I’ve noted over the last few posts, I’ve been monitoring my shopping list, waiting for conditions in the market to improve.  Today, I am adding a new stock with an excellent upside setup.