Horrible Jobs Goose Gold and Bonds

The market ended a flat week on a similar note as investors digested a below-consensus reading of the Employment Situation Report for May. The S&P 500 lost 0.3%, ending its week unchanged. Friday’s trade included weakening in the dollar, a downswing in oil, a rally in Treasuries, and the underperformance of the financial (-1.4%), consumer discretionary (-0.6%), and technology (-0.4%) sectors. The Nasdaq  (-0.6%) finished behind both the SPX (-0.3%) and the Dow (-0.2%).

Gold for June delivery gained 2.5% to $1,240.10 an ounce. The GDX, which includes shares of gold-mining companies, surged almost 12%, its largest gain since November 2008.

Therein lies the rub, as we are short the gold miners. So lets take a breath and analyze this for a minute.

The entire planet thought that the jobs number, at the very worst, would be fairly flat compared to the last report. The estimate was anywhere from 130K to 160K jobs, The number came in about 35K and I believe that was the worst number since 2007. This was one of the biggest blind side moves I have seen in a very long while.

The market was positioned the other way, meaning short, so when the jobs number came in ridiculously soft, interest rates and the dollar plummeted and gold miners ran hard to the upside. Most of the move was because of short covering.  Much was new buying too.


Metals & mining also reversed hard.


I do believe there will be higher prices for gold here, not as dramatic as Friday, but there should be some follow through. As the etf’s that we are long opened below my stops I have no choice but to hold for now. I will keep you posted on how I will trade this in the days ahead.

Right now emerging markets, gold, silver and metals like what happened on Friday. Utilities and other bond proxies also got a lift too.

The question is what the rest of the market will do now. Many feel the fed has lost all credibility and sectors related to interest rates will be the big winners or losers.

The SPX closed back under 2100 on Friday, so it will interesting to see how we proceed after this all gets digested.

For now I am sitting tight with all positions and will keep you posted throughout the week.



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