To The Moon

The market was in a downturn despite we get a beautiful job report on Friday (10 Jan), and we saw non-farm payrolls at 256,000 added to the public sector in relation to the 260,000 expected/

This has make investors concerned and wondered why. we need to understand that the report is showing seasonal jobs for seasonal hiring for the most important period of the year (e.g. Christmas)

But do we want to prefer the data to the flip side to the negative or losing jobs in the busiest period of the year which would show us that no one is shopping and institutions or corporations are worried about dwindling profits and dwindling sales or the companies are not hiring.

But the data goes to show Q4 was a very strong seasonal period and that hiring was required to keep up with the demand. So it is hard for us to really pick on the report as looking at the midyear point or the 12-year running mark everything was good in terms of unemployment.

Unemployment rate down from the 4.2 expected to about 4.1 which all in all is very close to the historical normal average rate of unemployment.

So after such good news why the market was down same on Wednesday (08 Jan), we got the jolts jobs openings reports that showed that there is more jobs available in the economy than there was in the past few months these two things are very bullish news reports for the market

Market Now in Tail Of Between Two narratives

However the market is now in a tail of between two narratives where good news is now bad news for the market we have seen this play out many times over 2023 and 2024 alike whereby the markets want one of two things they cannot have both you either want interest rate cuts in a rapid fashion which is what we are seeing right now all of this since Jerome Powell has been some sort of an interest rate temper tantrum whereby the Fed has reduced its amount of possible rate cuts for the foreseeable future.

Rate Cuts Of Four Went Down To Two

Federal Reserve has reduced its amount of possible rate cuts for the foreseeable future we can see that right here in terms of the federal funds rate, the September projection was for 3.4% by the end of 2025 they have put it up to 3.9 so we have went from four cuts to two cuts possibly that is one of the reasons that the market is not liking it right now.

As a result we have been seeing some slides and some downside volatility so the market is having a temper tantrum in terms of not getting the interest rate cuts that it wants.

We need to ask ourselves again what is the flip side, to me the flip side is all this jobs data comes in extremely negative and points to a recession scenario.

So if we want the lesser of two evils right, do we want somewhat sticky inflation and higher rates for longer although the median wage growth is a the rate of inflation which is very important to look at people are earning more money than the rate of inflation is going up so we are regaining purchasing power right now that is good for the economy strong jobs reports are also good for the economy.

But what would the market least want is the market in all reality would least want the jobs to be falling off a cliff the economic production to be falling off a cliff and us to go into a deep form recession, they would not like that the markets would be a lot lower than right now.

So what we are having now is a market that by all means and by far and by large it is happy with the direction of the economy they are just not getting the amount of interest rate cuts that they want right but we are definitely not having any recessionary data which would be the worst of the two cases of scenarios.

Pros and Cons Of Stronger Job Data

This is the factors that contribute to the pros of a stronger job data, and we can see that the market is still very much looking optimistic or cautiously optimistic on 2025.

Pros

• Economy is still strong as GDP at 2.8%, wage growth is above the climbing interest rate at 3.8%.

• Fed Chair still optimistic about 2025 despite market reaction to his labor/inflation comments

• Jobs market through JOLTS or NFP not yet unravelling

• $SPDR S&P 500 ETF Trust(SPY)$ EPS growth still within 12 to 15%. As data compiled by fax set brand new report released January the 3rd factset show earnings growth of 14.8% and revenue growth of almost 6% for calendar year 2025 for 12-month peate ratio is about 21.4 for the Spy slightly above the historical average of 19.7

• Semiconductor with AI growth outlook is extremely strong as large players say AI trade is definitely not dead

• Monthly uptrends still present

Cons

• Technicals for daily and weekly timeframe are breaking down which lead to uncertainty speculation around inflation and interest rates

• Current sell-off is based around speculation largely around Trump’s new policies when he comes into office. Market does not like uncertainty.

• $NVIDIA(NVDA)$ selloff reaction after its CES, despite a beautiful presentation, yet market sold the shares down.

• Trump tone shift November until Now

• Bank Earnings amid Higher for Longer Rates (Net Interest Income)

• Yields (used to be speculative, now real), repricing like 2024

• Loss of bullish sentiment, speculation risk-on trade unwind, loss of weekly index uptrends

• Tech earnings (profits, layoffs) important because tech supposed to carry in 2025 because of high yields

Bitcoin is in Head and Shoulder, we are seeing the same for SPY

When we have a massive head and shoulders pattern on daily like this, the odds of the follow through get higher and higher because of the uncertain market environment, if this happen to individual stocks we still might be not so cautious, but if both Bitcoin and SPY are putting on head and shoulders patterns we have to pay attention to that, it shows a technical breakdown and a lack of upside momentum now.

Factors Which Might Catalysed Volatility

There are economic data, events and earnings in the month of January that might pushed up volatility or rather catalysed volatility.

We have the CPI, PPI, December Retail Sales (which is going to be a huge one) data coming in the week of 13-17 January, and we are expecting some bank earnings in the same week.

In the week of 20-24 January, we are going to hev the Trump Presidential Inauguration and also the GDP events.

The final week of January (2-31 January), we are going to have all the Big Tech earnings and Fed Chair pause on the 29 January and finally the PCE inflation data on 31 January.

Summary

So the head and shoulder pattern presented on both the Bitcoin and S&P 500 are worrying, this could indicate that market is still going into deep consolidation and what we need to pay attention to is whether there will be some earnings that could help to push some of the sectors.

That could help to bring the market tantrum to a pause, as market would begin to accept that lesser rate cut would be the norm moving forward by not having the risk of going into recession.

Appreciate if you could share your thoughts in the comment section whether you think market consolidation would go deeper and we could be seeing more downside till the end of January.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.