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Strong Jobs Numbers Erode VIX

David Becker
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The VIX continued to break down following the stronger than expected payroll data, hitting a new low for the move at 10.3%. Momentum has turned negative with the MACD (moving average convergence divergence) index generating a sell signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The index moved from positive to negative territory confirming the sell signal.

Strong jobs numbers could be the impetus for the declining VIX. According to the Department of Labor, U.S. nonfarm payrolls, surged 288k in June from 224k in May and 304k in April. The unemployment rate fell to 6.1% from 6.3% previously. The labor force rose 81k, while household employment increased 407k. Average hourly earnings increased 0.2% following a 0.2% May gain. The workweek was steady at 34.5 hours. Private payrolls climbed 262k, consistent with the ADP number, with the goods producing sector expanding 26k, while construction rose 6k, with manufacturing up 16k. The service sector expanded 236k. Government added 26k. Treasury rates are skyrocketing higher.

The Labor Department also reported jobless claims data. The 2k climb in U.S. initial claims to 315k in the final week of June capped the two-week drop to a lean 313k (was 312k) in the prior week and 314k in the BLS survey week from 318k at the start of the month, as the figures oscillate closer to the 298k cycle-low from early-May than the 345k recent-high at the end of April.
Claims are averaging 315k thus far in June, following prior averages of 312k in May, 322k in April, 320k in March, and 337k in February. The 314k BLS survey week reading undershot recent BLS figures of 327k in May 323k in March and 334k in February.

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