9/2/2016 - BLS Employment Situation Report

The BLS Employment Situation Report released at 7:30 this morning in our time disappointed. This is typically dollar bearish and hence supportive of contra-dollar assets such as precious metals, currencies, oil, and commodities generally. The report still showed employment growth albeit it at a slower pace. Average hours was down, that was not viewed very favorably by the market.  So the report was less than hoped for but wasn't screaming recession either. This combination is likely a positive for stocks as there appears to be no major problems and a rake hike at the next FOMC meeting on September 21st is believed by the market to be off the table. Despite Janet Yellen's hawkish tones at her Jackson Hole speach, she mentioned that if there was data contrary to their forecast, they may tend to remain more dovish.  

So, the report creates a lot of uncertainty.  Interestingly, despite the BLS report, the dollar continued to rally, albeit anemically.  

Precious metals rallied strongly all day from low levels.  If this is simply the retracement of the first leg down, it should have a bit more to go.  If precious metal companies make new highs, watch out.  We are skeptical about the probabilities of a continued bull market in precious metals in view of the continued dollar strength and net positions of traders as set forth in the CFCT's COT Report.  It comes out this afternoon and we'll get an analysis Monday morning. We are keen to see whether there has been enough UNWIND to permit a continued advance.  If it proves meaningful, we'll try to report it here.

The point is, today's market action may indicate we have more strength in stocks and commodities than we did only days ago.  Therefore, the case for being very defensively positions has weakened.  We are not, however, advising anyone to step up to the plate and make a big swing at the broader markets either