"I get nervous because the next move in China is going to be a political move, and political moves are never well anticipated by markets. The Beijing regime is going to take steps to defend itself, or at least insulate itself, from the growing Narrative that they are incompetent. Heads will roll. Literally, in all likelihood. But the incompetence genie is very hard to stuff back into the bottle, and depending on whose head is on the chopping block, regime stability can deteriorate very quickly. Now that's what will make me change my bullish stance on China fundamentals, and that's what will make the US market swoon of last August look like a gentle spring rain."

It's getting worse... faster! These two stunning overnight developments in crude oil prices should shock investors...

Bubbles don’t correct - they burst! Sure, U.S. stocks might have climbed out of the August correction. But too many small- and mid-cap stocks are in the red to say "the coast is clear." And these growing divergences in the market are showing that we are very, very close to bursting.

Small Caps have been red most of the day but the major US equity indices clung valiantly to hopeful "China is fixed... and what about Jobs" gains (despite the recessionary print in wholesale data). But that is all over now... The S&P 500 and Dow have now broken down and turned red for the day...

Transportation revised up thanks to UPS/Fedex revisions; December boosted by warm weather, January to reverse; Low oil prices benefiting the petrochemical sector; Consumer Spending remains strong

Earlier we gave a big picture explanation how the US can add 292,000 while average hourly wages actually decline. Below is a more nuanced answer, looking at the breakdown of jobs by industry in December.  It will probably come as no surprise to anyone that for another consecutive month, the well-paying jobs: mining and logging, wholesale trade, manufacturing, and information barely posted a net increase. At the same time, the poor paying jobs continued to soar.

Don't show Phil LeBeau this chart!

BANZAI7 FOOD AND BEVERAGE WARNING!

The good news - wholesale inventories are being worked off (falling 0.3% MoM in November - biggest drop since May 2013). The bad news - inventories are being worked off (crushing Q4 GDP hopes and Fed forecasts). The ugly news - Wholesale sales collapsed 1.0% MoM - the biggest drop in a year (leaving the spread between sales and inventories at a record high). The ugliest data of all - inventories-to-sales spiked to 1.32x - (the highest since 2008's crisis recession and as high as the worst in the 2001 recession!)

When will we know that the United States is really close to “normalizing interest rates”? The U.S. dollar will no longer exist, and (hopefully) neither will the Federal Reserve – the entity which promised to “protect” that dollar.

As we noted earlier, while the headline payrolls print blew away consensus estimate, printing above the highest expectations, there was a rather unpleasant number in the data: nominal average hourly wages actually dipped by 1 cent to $25.24.  What caused this? There are three reasons.

We might get a bounce here to retest that green line, but unless a major Central Bank launches a new monetary program stocks are heading DOWN.

As we noted in the jobs preview, only a super strong number had any chance of prompting a market reaction, and sure enough, the just announced December print of +292,000 smashed expectations of +200K, surging from last month's upward revised 252K. So time for another rate hike, right? Not so fast: as usual, the fly in the ointment was a well-familiar one: wages simply did not grow, and with Wall Street expecting a 0.2% increase in average hourly wages, in December not only was there no wage growth, but in fact, average hourly earnings posted a tiny decline from $25.25 to $25.24.

This week is simply the worst we had in recent history for markets, RBS exclaims, the worst ever start to the year for The Dow, the worst since 1999 for S&P and the second-worst for credit since 2008. Worst still is, they think there’s more weakness ahead and that many fundamental risks will continue to haunt markets. Why? Simple! Investors drank too much policy kool-aid last year.

Now that the Fed has commenced its rate hike cycle, the jobs report suddenly takes on far less significance because only a massively "outlier" print will have an impact on Fed thinking, thinking which so far appears undented despite a raging manufacturing recession across the US. This means that the December jobs could be the "most important ever" only in retrospect.