Strange Week So Far...

Job report came in inline with expectations indicating a steady growth in jobs but that didn't quite spark off any form of excitment in the market as this outcome has already been fully priced in over the past few days.

This is how the market works... the market is forward looking and prices in the possibility of an event before it happens and then if it happens inline with expectation, all is well and the market doesn't move very much; if beats expectation, the market rallies again to price in the new information; but if it fails to meet expectation, the market collaspes and takes back all that has been priced in so far. Simple logic but complex in its identification.

Obviously, it is the first scenario we are experiencing this time round. This might suggest that the possibility of a slightly more than 25 basis point Fed rate cut next Tuesday has also been fully priced in! So far, with all the actions being taken in the economy and all the rosy data, reasons for a strong 50 basis point cut (or even a 25 basis point cut??) is diminishing by the days. If the Fed cut by just 25 basis points, we could still see a pullback in the market as it loses momentum; 50 basis points could start a good short term leg up and no cut could mean back down to August lows... still dangerous times to be betting on the market.