Wall St. Shrinking Workforce- Not Good

Oh really?
One thing I’ve learned over the years of being on, around, with, under, on top of, and at the bottom of Wall Street’s markets: when brokerage firms start laying off brokers, traders, and staff, there is a major slowdown coming (recession?). Bank of America is preparing big layoffs in investment banking and trading, oh and there’s more, lots more, here.
What do you see from clicking that ‘here’ link? Right. Wall Street firms are laying off, thinning payroll because they expect less business. Those firms hire in advance of business booms and layoff in front of big slowdowns. You may not like Wall St. firms, but they are not stupid.
Here’s why that’s important to me: I’ve been trying to make a relatively bullish case in the Trading Room pointing out rising industry ETF charts and so on. In other words, as bearish as I’ve been all along I recently could find reasons to think bullishly until that latest Bank of America headline. It reminded me simply of previous bank downsizing in recent years. As a result, I’m back to being cautiously optimistic realizing that the market always gives us a last chance to exit before a breakdown.
Pull up a 20 yr. daily SPY chart. Follow the chart action paying particular attention to: 10/21/97, 7/22/98, 8/25/98, 9/1/2000, 11/7/2000, 12/10/07, 9/19/08, 12/1/15, and 12/16/15. Notice that last rally that failed to get back to previous highs?
How about Friday’s bearish candle (2/26/16) or will it be 2/29/16 that tops out? If you draw your downtrend line from 12/2/15 maybe SPY moves to just under 200 but can’t break above and rolls over. I certainly don’t know how it will play out but my bearish antennae are on full alert going into March even though I know Mr. Draghi will pull the trigger in March…. just when I thought it might make sense to sharpen my bull horns.
(Once again, why do I write out chart data I want you to examine rather than just show you the chart… because when YOU do the chart work you’ll remember it, it will mean something to you. If I just give you the chart, you look at it and shrug… and move on.) Come on, learning to trade means you have to do some work.
May we live in interesting times…. oh, wait… we do! Meanwhile, trade what you see while preparing for what you don’t see.

About wallstreetpirate

Thirty-five years in financial services from insurance to registered investment adviser, and trader (now retired). Currently helping wanna-be traders and experienced alike as a trading coach and mentor. I've been in and around, on top of, in the middle of, and on the bottom of the stock market for a long, long time. Here's all I've learned: Trading is about behavior, psychology, and appreciating what the charts are saying technically. You can't fake it. Either you know what you're doing or you don't. And as much as this isn't rocket science, it takes knowledge and a skill set to survive.
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