The first quarter decline in non-farm productivity was the largest since 1947. The chart below from briefing.com shows the 7.5% plunge, contrasted with an 11.6% increase in unit labor costs. If the country had locked down during this time, you might be able to make an argument that a recession isn’t necessarily coming. But, this slowdown came courtesy of a 2.4% output decrease. In other words, it’s another reason to believe a recession is here and a soft landing ain’t in the cards.

Futures have been all over the map overnight, but are currently hanging on to the channel bottom from May 20. Note that we finally got that 10/20 cross and are nearing a backtest of the 50-day moving average – just in time to set up a nice trap.

continued for members…

If the analog holds, that is…

Currencies are essentially still on hold, with some big moves likely coming next week in EURUSD and DXY. Aside from a major COVID lockdown or recession, what’s going to stop oil and gas from continuing to rise? That’s the problem the bond market faces. About the only other thing that will keep interest rates from ratcheting higher is a large decline in stocks that sends flows back into bonds. If the analog holds, we could get another pop by tomorrow which might backtest the SMA50. But, next week would be the start of another 20% leg lower.

Stay tuned.