It was a Payrolls week, along with a few other reports:
- Nonfarm Payrolls (PAYEMS): +187k (+0.12% m/m), prior +0.12% m/m. New all-time high for payrolls. Expansionary.
- Durable Goods (DGORDER): +4.38% m/m, prior +1.96% m/m. A new all-time high.
- Auto/Light Truck Sales (ALTSALES): +0.50% m/m, prior +3.86% m/m. New all-time high for heavy truck sales.
- ISM Manufacturing Index: 46.4, prior 46.0. Values < 50 = Contraction.
- Bank Credit (TOTBKCR): -1.8B (-0.01% m/m), prior +0.09% m/m. Deflationary.
- Fed Balance Sheet (WALCL): -36.6B (-0.45% m/m), back to mid-2021 levels. Deflationary.
It was a mixed set of reports; on the one hand we have contracting credit and contracting ISM manufacturing, and on the other we see new highs for heavy trucks and durable goods. What’s more, payrolls continue to grow as well (which is expansionary), although cracks are beginning to show up in the “working part-time – only part-time work available” (LNS12032196) series which grew +6.51% m/m. This series tends to jump higher right before recessions, and it is starting to do so now.
Short-term rates inched lower towards the Fed Funds Rate, while the 10-year yield moved higher. The declining short-term rates project a pause in Fed rate increases, while the rising 10-year is now an official danger signal – not for the economy, but rather as an indicator suggesting a shrinking demand (and/or an expected increase in supply of) longer-dated US government bonds. There was a lot of news around that this week, including a credit downgrade – in this section, I’ll just present the charts, and discuss the details later on.
The DGS10 weekly model (10-year yield) has moved into a strong uptrend; it feels to me that it will break out to new highs in the near future. That’s bad, if you own one. Normally if a recession is expected to occur, Big Money runs to hide in the 10-year, and yields plunge. That’s not happening right now.
SPX had a bad week, falling 104.20 [-2.27%], and printed an ugly-looking swing high candle print, which looks reasonably bearish. SPX fell for 4 days out of 5, ending the week at the lows.
by thc0655 
