We will leave the fundamental “ranting” on whether the economy is great or not given the latest jobs report. What is of importance, is the fact the recent narrative of yields lower, Fed to cut and equities higher, could be risking to reverse. If there is a change of narrative post these latest jobs figures, things could become interesting very quickly.
US yields spiked higher, note the 2-year yield spiking very big.
These are huge moves.
The SPX is right at resistance levels. Picking a possible top is impossible, but in times like these, a change of a narrative, could risk reversing a lot of the recent move across assets.
Playing an uncertain outcome is best done via options. Global vols across assets have imploded. Pretty much all volatilities are relatively low, thus offering interesting long premium strategies.
Narratives and stories do not change on one economic figure, but it usually starts with something that then feeds into the market and produces the next story.
If the next story is that the Fed won’t cut next, then the current levels of VIX as one vol asset could prove to be interesting long entry levels.
We would look at VIX call spreads, especially in the shorter-term maturities, because if the narrative starts changing, it will move quickly.
Source, charts by Bloomberg