The June U.S. Non Farm Payrolls Report showed that employers cut more jobs last month than estimated, curtailing demand for higher –risk, higher-yielding assets while sending the U.S. Dollar sharply higher.

Pre-report guesses indicated that traders were positioning themselves for a job loss of 365,000. The Dollar rose sharply higher when the U.S. Labor Department reported a total loss of 467,000. The unemployment rate rose to 9.5%, slightly better than the estimate but nonetheless set the stage for a possible move to double-digits sometime in the near future.

September Treasury Bonds and Treasury Notes rose on the surprise news. This move reaffirmed the current uptrend and indicated that market participants feel the Fed is going to have to do more to provide stimulus to the economy. Yields fell on the notion that more money may have to be pumped into the economy. Although this is inflationary in the long-run, traders are not focusing on the long-run at this time and are more concerned with a deflationary environment.

Equity markets fell on the news as traders cut long positions in anticipation of a worsening economy. Trader confidence seems to have been eroded by the bearish unemployment news. Jobs are being lost and consumers aren’t spending. This is beginning to add up to a potentially bearish situation. Traders have been waiting for a 50% correction of the March to June rally, and today’s action indicates that investors who have been on the sidelines may get their wish.

Even if they get their wish, there is no guarantee that investors will jump into the market. The economic situation at the time will have to be evaluated. The talking heads on TV seem to believe that the money on the sidelines has to come into the stock market. This is not true. Investors will be just as willing to put the money in the bank to assure return of their capital instead of return on their capital.

August Gold could not hold on to gains produced earlier in the week. Without inflation to drive this market, speculative money is standing on the sidelines. It is possible that a substantial break in the equity markets may send investors into Gold, but if both commodity and equity prices fall, investors will go to cash or Treasuries.

November Soybean traders are facing a difficult dilemma. Earlier in the week, this market broke back into a major 50% retracement area at the same time Argentina announced the possibility of cutting all exports of next year’s crop. The market rallied on the news but basically retraced 50% of the break. If the market stalls here then the rally was just short-covering. If the rally can overcome the resistance at 10.21 ½ to 10.39 ¾ or survive another break to form a secondary higher bottom then the buying was real and this market should test the 10.99 ½ high.