Here's how the Fed minutes read, "Many participants observed that, because of transitory factors, such as statistical noise and the effects of a strike in the telecommunications industry, the reported rate of payroll job growth likely understated its underlying pace; however, many participants thought that the underlying pace had slowed some from that of previous months."
Why Does Elazar Think "Many" Fed Officials Would Short For Friday
After the June 3rd non-farm payroll number slowdown, a rate hike was no longer "on the table."
Thereafter Janet Yellen's rate hike "in the coming months" was also "off the table."
Markets followed through on the upside thereafter due in part to the news.
Here's the SPDR S&P 500 Trust ETF (NYSEARCA:SPY) responding higher soon after that report.
You can see the nice follow-through after the weak report.
The reason was a rate hike was "off the table."
Here's the "off the table" chart.
Here's the June 3rd "off the table" jump in this chart. (Fed Funds Futures price is 100 minus the expected rates. If rates are no longer expected to go higher we get closer to 100, thus the jump.)
Here's the June 3rd Jobs report
That 38k met the Elazar Advisors "off the cliff" threshold.
The 38k came in versus street expectations of 155k (ouch).
Why Would Meeting Street Numbers Friday Be Bad?
This month expectations are for 175k, which would be a big number and even more than they expected last month. If it reached there we think markets would go down, even though it's expected.
Because Fed Chair Yellen pulled a rate hike "off the table" for one month of reported numbers.
We have an issue with the "Many" language.
If Elazar wrote those minutes it would have to be "ALL." Why? They pulled the rate hike. That's what happened. They didn't pull the rate hike because they thought the number was a fluke or "noisy," right? They pulled it because they ALL thought growth was slowing.
If "ALL" pulled the rate hike because they thought growth was slowing and Friday prints a 175k, uh oh, they are all wrong and growth is not slowing and a rate hike is...?
Say it together...
"Back on the table."
(If you tell us you actually said it aloud you will get a coveted Elazar "like," but you have to let us know.)
That would require "Many" or "ALL" of the "ALL" to change their stance once again to put that rate hike "back on the table."
Then we will draw you a nice SPY chart one week from now of the opposite direction we showed you above (down).
Elazar's Best Guess For Friday
We agree with the "ALL" of the "Many" and think the number was weak. We expect the number to miss that estimate. We wrote Sunday, "FOMC Minutes. We expect...weak payroll commentary [to appear] as bullish given less need for a rate hike."
Markets are up today. We think that's the relationship:
"On the table" = down markets
"Off the table" = up markets
In short time frames anyway.
We expect weak numbers because of the jobless claims trends.
Here's Thursday's jobless claims trends
Jobless claims look like they are moving up (economic weakness) from their lows of 248 back in April.
We're taking the cue from jobless claims to guess on Friday's payroll numbers. Since jobless claims are looking higher (economic weakness) we think that will mean Friday's numbers will stay weak below expectations of 175k.
BUUUUT... If Thursday is strong, be very careful about Friday.
Conclusion: Friday could be jumpy either way
This Friday's jobs number is more anticipated than any Star Wars sequel. Strong will mean down markets, weak may mean up markets on Friday.
According to Fed officials "Many" thought June 3rd's payroll weakness was due to "noise" or "strikes." If they are right, Friday's stock market will be down.
Deeep Thoughts By Elazar Advisors...
If you didn't catch it there is new Fed math "Many" ("plus") "Many" (Equals) All or more than all. I'm confused by that one.
I thought Many plus Some equal all. Can anybody help me on that one? Too many "manys" in that first quote from the minutes in our report, no?
So you don't have to scroll all the way back up to the top to see it, we saved you a trip, here's their statement again.
"Many participants observed that, because of transitory factors, such as statistical noise and the effects of a strike in the telecommunications industry, the reported rate of payroll job growth likely understated its underlying pace; however, many participants thought that the underlying pace had slowed some from that of previous months."
Please, stay safe.
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