Are we at the point in the cycle where folks are hoping for bad news because bad news for the economy is good news for bonds? And good news for bonds means lower interest rates and lower rates would help stocks? At least that is how the logic goes.
I am not a Fed watcher. I am just a market observer and what I see is a week ago, when the stock market kept going down, folks were not talking about a Fed pivot. Now that the market rallied 6% for the S&P 500 earlier this week it almost seems folks are looking for a reason for the Fed to pivot. Yet the Fed members keep saying rates are going higher.
My guess is if the Jobs Report on Friday is weaker than expected the Fed Pivot crowd will get loud. And that would be a sure sign that sentiment has changed from just a mere week ago.
Or will folks prefer to focus on the earnings misses? You know, like Advanced Micro Devices (AMD) , as a way to stay bearish? Wait, aren't earnings misses signs of a weakening economy and therefore good for bonds?
I'm sure you see the conundrum. No one wants to fight the Fed. No one wants to take on risk in the stock market when they can get 4% in a Treasury guaranteed, with no risk.
As you can see, we can make up a gazillion different scenarios and an equal number of narratives for the market. Statistically not much has changed.
Breadth has backed off but so have the major indexes. The number of stocks making new lows is still far fewer than they were a week or so ago. And my Oscillator is not yet over the zero line. It is possible it doesn't get there -- that's what happened in early September -- but it is unusual. Most of the time once the market gets oversold the Oscillator finds its way back to an overbought reading over the zero line.
What did change was sentiment, which shifted a bit. The National Association of Active Investment Managers lifted their exposure from 10 a week ago to near 40 this week.
The American Association of Individual Investors saw bulls tick up four points to 24% and bears back off six points to 54%. So a small shift. My guess is folks thought that midday rally on Wednesday was bullish.
Even the put/call ratio has fallen to the 0.90 area after being over 1.0 for weeks. That has caused the 10-day moving average of the put/call ratio to roll over.
Should the Jobs number come in weaker than expected and therefore rally bonds and stocks then I would expect that Oscillator to scoot over the zero line. And then I would expect sentiment to shift a lot more.