Model switches to CASH/NEUTRAL.
The DJIA and broader based NYSE Composite have been badly lagging the more tech-centric NASDAQ Composite and NASDAQ-100. The bifurcation of stocks is at an extreme with more and more stocks lagging than before. We also have the NVDA 10:1 split which may create a major top for NVDA which would upset major averages.
The jobs report came in hot showing wage inflation pressures. The Fed is therefore less likely to lower rates sooner than later. The unemployment rate is now 0.6% above the cycle low from April 2023 (3.4%). Historically, that 0.6% move higher has occurred near the start of a recession. But this time, stealth QE is prodigious and continuous thus may continue to prop markets. It will be key to keep a close eye on future unemployment rates to see if they can hold steady. In prior times, unemployment starts to quickly rise.
The EU lowered rates for the first time since 2019. It is surprising they are doing this ahead of the US Federal Reserve which may mean recession is incoming in the EU.
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