Weekly Plan5/31
Hello traders, gamblers and everyone in between. Hope you all had an excellent and rejuvenating long weekend.
Last week we had another excellent week with both futures and options trades.
I traded a little Sunday evening (girlfriend wasn’t one bit pleased)
(kind of limited on sharing screenshots as substack keeps warning me about email length)
As you all must have read by now, House Republicans reached a tentative deal with the White House on Saturday night to raise the nation’s borrowing limit and avoid a catastrophic default on U.S. sovereign debt. As was mentioned in the part 1 of the debt ceiling substack, that is what was shared and the default as been averted as predicted(as of now!).
Two key events this week are JOLTS report on Wednesday and NFP on Friday. The Fed would be watching closely at both the numbers to go ahead with a skip or a pause based on the figures.
**SKIP THIS PART IF YOU KNOW HOW THEY ARE RELATED AND MOVE TO THE NEXT SECTION**
The JOLTS report offers a comprehensive view of job vacancies, hires, and separations. A high number of job openings can signify a robust demand for labor, suggesting economic expansion. Conversely, a decrease might indicate a weakening labor market, reflecting economic contraction. But it's not just about the raw number of jobs - the nature of the job separations also matters. Are they voluntary (people quitting because they have better options) or involuntary (layoffs and discharges)? An increase in the former is generally a sign of a healthy labor market, while an increase in the latter can be cause for concern.
The NFP, meanwhile, is a key indicator of job creation in the non-agricultural sectors of the economy. As such, it's a direct measure of whether businesses are growing or contracting. A strong NFP report, characterized by a significant increase in job creation, often prompts a bullish response from the stock market and can push the Fed to raise interest rates, to prevent the economy from overheating. On the other hand, a weaker-than-expected NFP report might suggest economic softening, possibly leading the Fed to adopt a more cautious approach.
The Federal Reserve, as the guardian of the nation's monetary policy, keeps a close eye on these labor market indicators. Their role is to ensure economic stability, balancing the twin goals of maximizing employment and keeping inflation at a manageable level. The JOLTS and NFP reports can significantly influence the Fed's decision-making process. If both reports indicate a strong labor market, the Fed might feel more confident in continuing with its current course, potentially including further tightening of monetary policy. Conversely, if these indicators suggest a weakening labor market, the Fed might opt for a pause in order to stimulate economic activity.
In essence, these two reports provide a kind of economic health check. Their interpretation, though, is not always straightforward, and understanding the nuances is crucial. As observers, we must remember that the economy is a complex organism, and a single report rarely provides a complete picture. It's about discerning the broader trends, the narrative that's unfolding, and the potential implications for policy. So, as we await the JOLTS and NFP numbers this week, let's not just focus on the headline figures, but also take a deep dive into what they might mean for the story of our economy.
Nasdaq, AI and the nature of hype-cycles:
We are now at the stage where erstwhile laggards will be propped up due to the AI frenzy. As someone who uses Machine Learning on a daily basis and has been an AI bull since 2020ish.
I’m looking at some names here that the rising tides will lift. Some of these names I like for speculative plays are