A Weak First Non-Farm Payrolls Report for 2014

ESH4 15 Minute 100114

Good Morning, Friends. Non-farm payrolls remains the most closely watched economic report every month, and it’s been a reliable payday for me, using the method taught by Todd Mitchell as the “First Half Hour Breakout”. This morning, the report offered the worst of both worlds; the headline number, at 74k new jobs, was far lower than anticipated, while the unemployment rate dropped all the way to 6.7%; 7% was expected. To be fair, the November number was revised up, but that’s getting to be ancient history, and it’s always the most recent month that generates the spike in volatility.

Traders and investors may fear that the lower unemployment rate will give the FOMC cover to increase the pace at which it reduces its purchases of Treasury and mortgage-backed securities when it meets on January 28-29. The key catalyst for the drop, however, is people dropping out of the labor force, and the researchers at the Fed are well aware of that. This will be Janet Yellen’s first meeting as Fed Chair, and while I won’t be enormously surprised if there’s an additional tapping on the brakes, I don’t think that today’s number makes additional tapering more likely.

As always, the talking heads will have plenty to say. If we stick to the charts, identify the trend, trade with it, and minimize our losses, we can pretty much ignore the commentary. An acquaintance of mine, a senior trader at BlackRock, has as his Bloomberg Messaging headline: “A trade is a disagreement on value, and an agreement on price”. That’s exactly right, and if we follow the program taught by Todd, we can correctly identify value.

Best of luck today, Friends. 

About the Author kevin

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