Today is about nonfarm payroll.. tomorrow is about the Fed decision 9/18

The indices were fairly volatile again yesterday and all were in both positive and negative territory over the day again. The VIX remains relatively high and is 22 at the time of writing - it hit 65 intraday on 5 August, its highest level since Covid in 2020 so this gives a measure of how volatile the Market could get today (Friday) once the August nonfarm payroll figures are released. Expectation appears to be around 160k albeit some forecasts are nearer to 200k. As a reminder the July nonfarm was 114k vs expectations of 185k, June's figures were revised down.

Once today is out of the way all eyes will turn to the Fed decision on the 18th September and expectations of at least a 0.25% cut in rates. Poor August nonfarm could actually convince the Bulls that the September cut will be 0.5% so there's probably some scope for the Market to stabilise fairly rapidly even on poor nonfarms, we will see.

The indices ended Thursday as follows: DJIA -0.54%, S&P 500 -0.30% and Nasdaq +0.25% (on the back of Mag7 +1.5%). On an equal weighted basis (our measure) the overall market was down -0.39%, all market cap bands were down the same amount which is unusual.

Breadth was a softer at 38% (vs 12% on 5 August and a high of the mid 80s% at the end of July) and daily volumes of 7.2b were light (vs the average daily volume over the last year of 7.9b). Following on from the comments above if the August nonfarm is weak then expect the Market to revisit the low breadth seen last month.

One day returns as follows - equal weight basis: Mag7 +1.48% (TSLA +4.9%, AMZN +2.6%, NVDA +0.94%), large -0.4%, medium -0.39%, small -0.36% and micro -0.4%.

On a 1 and 2 week equal weight basis; Mag7 -0.2% and -1.8%, Large caps -1.4% and -0.4%, Medium cap -2.2% and -0.7%, small cap -2.8% and -0.7% and finally Micro cap -3.2% and -2.1%. Our risk monitor remains in favour of the larger cap stocks. This performance differential favouring large cap was magnified after the poor July nonfarm payroll figures and the associated wider Market retreat. Much of the adverse differential reversed in the middle of August but as we approach the release of August nonfarm the small and micro cap stocks (higher perceived risk) have started to lag again and differential increased by almost 1.5% this week.