Closing Thoughts for the Week

Friday’s cooler than expected jobs report could mean the markets are at a critical juncture in determining the future path of returns. The door may finally be open for the big Treasury rip that I’ve been anticipating for months. While the huge gains in the major equity averages would suggest a strong risk-on pivot during the second half of the week, the underlying landscape is a little more mixed.

Risk-off sentiment picked up steam again this past week and in a pretty decisive way. The fact that this has been going on for several weeks in a row tells me that the event I’ve been warning about for a while could finally be here. The past few weeks, however, demonstrate that there really aren’t any safety valves out there right now. It looks like I was right when I said that we’ve been in a bear market all along. The only thing left really is a big reversal in Treasuries.

Does the Fed really need to tighten further right now? The market seems to think no. At this point, Powell seems much more likely to do harm than good. This coming week looks like it has the potential to get really ugly and there’s no shortage of catalysts. Intermarket behaviors suggest that investors are turning more cautious here and focusing on path.