Market Outlook For The Week Of August 8, 2016

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Summary

The week will kick off further discounting the barnburner July Nonfarm Payroll Report, which reeled in a healthy 255,000 new jobs.

The economy has now added jobs for 70 consecutive months, the longest such streak in history.

I always use my two-day rule when it comes to this game-changing data release. That’s how long it takes markets to fully discount its impact.

The week will kick off further discounting the barnburner July Nonfarm Payroll Report, which reeled in a healthy 255,000 new jobs. The economy has now added jobs for 70 consecutive months, the longest such streak in history.

I always use my two-day rule when it comes to this game-changing data release. That's how long it takes markets to fully discount its impact. I managed to nail the number position wise, betting on a pop in the US dollar with a short in the Japanese yen, which duly took place.

A healthy US economy will drive the Federal Reserve to raise interest rates sooner, making it more attractive as a store of value. This is especially true against the negative interest rate currencies of the Euro (NYSEARCA:FXE), the Yen (NYSEARCA:FXY), and soon to be, the British Pound (NYSEARCA:FXB). At least that's how it will be perceived by traders for the first few days.

I also made a timely exit from my short position in the S&P 500 (NYSEARCA:SPY) earlier in the week, clocking a 9.43% profit in only two trading days. Stocks rocketed to new all-time highs on the news. It's been a very good week.

It is hard to argue with the strength of the payroll report. The headline unemployment rate stayed at a full employment 4.9%, rendering last week's grim GDP report utterly meaningless. The May payroll report was revised up by 13,000, while June added 5,000 new jobs.

The big gains were seen in professional and business services (+70,000), healthcare (+43,000), and leisure and hospitality (+45,000). A new feature of the jobs picture this year is that the government has finally started adding jobs, largely through the hiring of teachers to accommodate local population growth.

Once again, mining was the big loser (-6,000) because it includes the beleaguered oil industry. After the fireworks of last week, the coming five days will be a yawn on the data front.

Don't forget that we also have the Rio Olympics all week, which, combined with the summer vacation schedule, tends to suck volatility out of markets. I can't tell you how many "Out of Office" messages I am getting these days.

By the way, the Volatility Index (VIX) is approaching new decade lows. On August 9th at 6:00 AM EST, we get the NFIB Small Business Optimism Index, which should show a modest improvement.

On Wednesday at 10:00 AM EST, the Labor Department JOLTS report should show a decline in job openings, reflecting the red-hot July nonfarm payroll report. At 8:30 AM EST on Thursday, the Weekly Jobless Claims gives us a more immediate read on the employment situation.

The Baker Hughes (NYSE:BHI) rig count wraps up as usual on Friday at 1:00 EST. Will the uptrend continue?

It all provides a healthy backdrop for a "BUY EVERYTHING" approach to investing for the rest of 2016. Expect stocks, bonds, gold, and the dollar all to continue to appreciate to new highs.

As long as the US offers the highest yielding stocks and bonds in the developed world, this will continue to be true. Adjust your trading accordingly. We are setting up for a melt up for the ages.

FXY $SPX
John on Deck Overlooking Alps

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.