THE BIG LIE: Small Business Just Exposed the FAKE Job Market

Stocks crashed due to small businesses exposing a 'big lie' about the labor market. While government reports show job creation, small businesses report six-year lows in hiring plans and difficulty filling jobs. The National Federation of Independent Businesses Optimism Index confirms a downward trend, contrasting with government data.

Small businesses are seeing a huge jump in plans to raise prices (36%, a three-year high), with more hikes expected. This is largely due to significant and unpredictable increases in fuel prices, which smaller businesses struggle to absorb compared to larger corporations. This forces them to cut jobs to maintain margins, signaling a weakening economy.

Small business capital expenditure plans have plunged to levels not seen since the 2009 financial crisis. Only 16% plan capital outlays in the next three to six months, indicating a lack of confidence in economic expansion and a reluctance to hire. This energy shock, a precursor to many past recessions, combined with rising inflation concerns, points to stagflation and a weakening labor market.

Despite market speculation about higher interest rates based on government data, the dollar's behavior suggests the Federal Reserve should cut rates. The market is ignoring real labor market data, like ADP reports which show slowing job growth and signs of consumer habit changes. The dollar isn't going higher, indicating that the Fed might make a policy mistake by raising rates.

The dollar is clearly telling us that the Fed shouldn't be raising rates, contradicting the market's belief that it should go higher. The DXY dollar index has been trapped in a consolidation period, and while many expect it to break out higher based on historical patterns and the Citi Economic Surprise Index, the dollar's correlation with payrolls suggests it doesn't believe the 'fake headline numbers' from the government. The dollar's likely rollover implies lower yields and a greater chance of Fed rate cuts, which could lead to a final blow-off top in the stock market before a potential downturn.

Technical analysis, including the dollar's failure to break out and its relationship with the VIX, suggests that the current market dip is a buy opportunity. The VIX has not moved as much relative to the market, indicating that dip buyers are coming in. Even with a weakening labor market, if rates come down as the dollar suggests, it could make a case for a final blow-off top in equities.