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Big T's Takeaways
Friday's May Jobs Report dropped like an atomic bomb on the global financial markets: 69,000 new jobs, vs. expectations of 165,000.
Bad Chicago PMI numbers on Thursday, matched with ever worsening news out of Europe, China, India and Latin America is forcing traders to begin pricing in a global recession.
The yield on the 10 Year Treasury hit a low of 1.44%. That is, to borrow a phrase from an old Cypress Hill song, "insane in the membrane." Remember, Treasury yields are a reflection of expected GDP growth plus inflation. At 1.44%, the bond market is screaming its opinion at us; that opinion is that we will enter a recession, and that inflation is not a factor worth considering.
We closed below the 200-day moving average on the S&P 500, which is bearish. However, we should at the very least have some type of over sold bounce on Monday.
I don't pretend to have a crystal ball, but what I can tell you right now is that US equities are not priced for another recession. Under a recession scenario, the S&P 500 could easily see 950.
The key here is to avoid the "deer in the headlights" syndrome. Assess your current market risk this weekend. Do you have stop losses in place on all of your open trading positions? If not, then I would strongly recommend doing some work this weekend to determine stop loss points for all your short term trades.
This is about living to fight another day, not proving how tough you are. Be sure to make the proper determination between short term trades and long term holds. They are two different animals. I don't sweat my long term blue chips during market declines, because I have a 10 year-plus time horizon on them.
However, my short term trading is a different matter. I always know where I will get out before I get in. If your palms are sweating and you find yourself hoping and praying for a bounce on Monday, then that's all the sign you need that you are taking on too much risk.
Ratchet it back until you are in the "palm-sweat-free" zone, because if we go into free fall and you don't have stops in place, you run the risk of getting engulfed in losses.
The Tycoon Report