Holy Molies! Why is the stock market taking a Poopsy doopsy Dumsy doodly? Well, we have multiple reasons for exactly why, and we're going to break them down right now. First, there is this delicious chart right here on the Reverse Repo facility. In this morning's course member live stream, we were analyzing why potentially this could have seen a spike followed by a draw down. Well, first of all, we know that on a monthly basis we tend to get draw downs from the Federal Reserve trying to vacuum up money.

This is very, very normal for the Federal Reserve. They can sell off their Holdings their bonds and when people send the money to the FED in exchange for the bonds, the FED is selling, the FED burns the money, effectively removing money from the economy. So it's very common to see a downtrend in the reverse repo facility because after all, the Federal Reserve has a very clear Mandate of reducing the amount of money that's in this reverse repo facility or cash part at the end of the year. Though, what's more interesting is we got this Spike leading right into the week of the 29th, which implies potentially more cash deposits by companies like big Banks big banks with trading desks that very frequently leave close their trading positions and then when they come back the first week of January, they take their cash and start executing trades again.

And what kind of Trades make sense when you're potentially at all-time high in the stock market for the Q's the S&P 500 Ndaq 100 obviously uh, and miscellaneous. Well, actually lots of other stocks including small caps which have started rallying Again, shorting shorting is not necessarily a horrible idea when things are at elevated levels, especially as you are walking into Massive catalysts. Not only the Jolts data that we got this morning, the Ism prices paid numbers which we'll talk about in just a moment uh, but also Fede the Fomc minutes, the Federal Reserve meeting at the end of the month on the 31st, their Uh projection for potentially rate Cuts uh, what the market is pricing in for rate cuts and of course earnings as well as CPI next week. Why would you go long at the beginning of the year at your trading desk or for your fund or whatever? Well, if you're a Trader, why would you go long right before all of those catalysts and coming into a new Fresh year, sitting at alltime highs you don't? So a lot of this is very likely traitor momentum because after all, the data is not that bad.

In fact, it's kind of exactly what you would want Consider, For example, jolts: This morning, we're at 1.4 uh, job openings per unemployed person. We're coming back into balance even. Nick T is talking about us coming back into Balance balance. Our fed Wikileaks Nikkil leaks.

Uh, Whisperer so to speak. So jolts coming back into balance? Not any kind of aggressive explosion in job openings, but also not a massive softening which if you remember in the video that I said prepare for the jolts Where we talked about what you wanted, you wanted a number that comes in roughly in line I said maybe a smidgen to the soft side. What did we get? We got 8.79 versus the 882. So in other words, a smid to the soft side.

That's what you want. You do not want the economy to fall off a cliff, especially not jobs numbers. The worst case scenario is not getting a weak jobs report and then the FED reducing rates faster uh and and then the market being happy because rates are going lower. The worst case scenario is a joblessness recession that induces deflation, not inflation.

Straight up deflation which we're already seeing. uh, and then massive joblessness and layoffs. Not just corporate, right sizing like Paychecks told us about, but straight up. Mass layoffs.

That's how you go into recession depression. Massive earnings. Cuts Then the inverted yield curve bears are like, see, told you. Okay, but that's not what the data said today.

The data said today, we're actually relatively stable on jobs. Not only did the Ism data say that hiring was essentially in line with expectations, if anything higher than expectations. Expectations for ISM Employment: 46.5 We got 48.1 That's a beat, That's good ISM Manufacturing Was expected to come in at 47.1 We got 47.4 That's a beat. That's good.

now. both of the numbers are under 50, so we're still in contraction, but we're Contracting less than we thought we would be. And then of course we got prices paid led by the energy sector, but price is paid for ISM We were expecting 49.5 49.5 The expectation would already incorporate publicly available data like commodity prices falling or oil prices falling. But what actually ended up happening? Expectations missed massively 45.2 with prices falling more rapidly than expected.

Winnebago Is complaining that their towables are down 8 to 15ish per in price. Ol of Garden doesn't see any price increases for what they sort of implied was the next two quarters in their earnings call. They see or saw year-over-year 5% inflation. but going forward maybe two, maybe 3% That's a restaurant that's Olive Garden You look at any company otherwise that's producing Goods We're almost straight up in deflation.

Just look at the earnings calls. No wage price spiral. These are actually the elements that we want want to see. We've got Barkin This morning suggesting a soft Landing is not inevitable.

However, his argument that we are long away from Cuts did end up moving markets down. Why? Because yesterday we were pricing in 75% Uh, with 75% certainty. Six rate cuts for 2024. Last week we were pricing in 84% Today we're pricing in 68.1% so you can see straight down in what kind of rate Cuts we're pricing in.

But again, you don't want the economy to go into recession because then all your earnings for all your companies are going to go to straight up trash. no bu, you don't want that and bad earnings low EPS Doesn't matter, you could have valuation expansion, but if that EPS number goes down, stock go down. You know? Unless you could look through a short-term recession like uh oh, getting thumbs up? Uh like uh like Co where you got Larry Cuddo every day we're going to have a V-shaped recovery I Don't know why he sounds like a De to Trump but whatever while else. So we got the short reload which is the same reason why we have the bond retracement short reload.

Uh, and that's why we're seeing resistance at a 4% yield on the 10year you've got. Uh, so short reload Bond retracement stocks at all-time highs massive Catalyst coming up a little bit unwinding in yields or sorry in in rate. cut expectations because that is not that bad. But let's be real.

we don't want bad data because we don't want to go into recession. Look at Niiki T over here. So if we jump into x what is Niiki T Telling us uh, latest Jolts report: ratio of job openings to unemployed trying to get back to about that 1.25 is level where we were previously drone Pals walked back the idea that we need to go to 1% so or one ratio 1: one ratio. So uh, getting closer to that 1.25 and you can see the N We've now on a 3-month moving average move below 9 million.

Although that drawing does not really look below 9 million. Boy, that's got to be like a hair below 9 million. Oh come on, look at that's ridiculous. That's like one of the the Capacha pro or what how do you call it Cap Capap I Don't whatever where like pick all the staircases.

Oh those things are so horrible I hate those things. Uh, meantime, other measures of Labor Market tightness have returned to pre-pandemic levels. All workers private sector Leisure Hospitality workers who quit their jobs remember quits. Uh, going down is a relatively good thing because people quit less.

Uh, when they don't think there's a better opportunity which is not I'm not saying that people shouldn't have better opportunities I think that it's wonderful if people can quit and go to a better opportunity, but it's a sign of uncertainty that. well if I leave here, I might end up with something worse. So uh, generally you you don't want an elevated level of quits because that could be a sign of more of a wage price spiral. Uh, newly hired workers as a share of total employment also plummeting here.

Actually low lower than levels where we were in 2018. Nick T here talking about these all returning to around their pre-pandemic levels. Fine, so what do I make of all this? Well again, look, we looked at the Ism prices paid Index This morning it reiterates what we're seeing in earnings calls on almost a daily basis. Deflation is essentially coming to goods and services.

Unless you're Roku and you have some like mental dis ility thinking that people are going to pay you $1,500 for a 75 in TV that you can get for $569 on Amazon th you know whatever TCL uh uh 4K Smart TV for you know, $1,000 less. but then again, that's Roku They they burn money like it's like it's candy I mean that's not even a good analogy, but just I don't I went off on Roku this morning in the stock market open live stream I Mean they are burning over a million dollars a day on research and development. Actually, it's probably even higher than that Anyway, it's terrible and I'm like what are you guys researching anyway? so um yeah, it's all that stock cop. they got to pay out $277 million in stock cop.

they just paid out anyway. Uh, so let's focus broadly here: I think the strongest uh uh leading indicator you have here which which you have a problem as well because if you have a bad start to the year over the last 5 years that has been indicative of a bad year. So if your first week not your first few days but there only two trading days left after today, If your first week ends up negative in the last, here it is I got the screenshot right here. I'll get out of the way.

you steal it. Go take a screenshot anyway. Uh, here you go. What do you got last five years here? Last 5 years? If your first five days ended up negative you the full year ended up up negative.

So you really want the first 5 days on the S&P 500 to go positive. Let's just say the first two days have sucked. so we need some kind of rally to to to push us for the full year here. Uh, but anyway, I think the biggest concern here is uh, a reloading of shorts as Traders are coming back.

Uh, and there is no reason to be buying stocks right now leading in when things are at all-time highs going into earning season. With all the Catalyst that we've talked about tomorrow, we ADP numbers coming out. Friday We've got the Jobs report. we've got CPI next week the FED minutes today.

Uh, there's a lot why. why would you buy? so it totally makes sense. Things High Short: Why would you buy? you? wouldn't you wait for the Catalyst You wait for earnings. So is this really a fundamental shift in the economy? Or all of a sudden we going into recession? No.

Are people going to go? That's it. This is evidence of a recession. Yep, Yep. here's our recession.

No, it's not with the data is saying either. Oh, but the DT is lagging. That's true And there are warning signs. That's why we should be cutting rates so we'll see what happens.

But we are starting to unpriced a little bit. Although First Rate cut is still priced in at 67% for March Anyway, go learn more at Ec.com Thank you so much for watching and we'll see you in the next one. Goodbye, Why not advertise these things that you told us here? I Feel like nobody else knows about this? We'll We'll try a little advertising and see how it goes? Congratulations man, you have done so much People love you people. look up to you Kevin PA there financial analyst and YouTuber meet Kevin Always great to get your take even though I'm a licensed financial adviser, real estate broker, and becoming a stock broker.

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