Weekly Market Assessment
The numbers are out, the total jobs created in December are...74,000; the smallest gain in 3 years! The analyst and mean estimates were over 200,000! How does the market react, the 10 Year Treasury Bond yield falls from nearly 3% to now below 2.9% as people looked to the safe havens and away from more riskier asset classes. As the numbers came out commentators and analyst had, as I thought a very strange reaction to the report. Many said, "Don't look too much into these numbers as they will be revised with a better result next month anyways." What!? So what numbers should you dismiss and what numbers should you consider? Its still amazing sometimes what comes out of these people's mouths! The trillion dollar bond market happened to think differently as shown by the huge change in interest rates. This is the one good thing that came out of this report, which will now affect interest rates across the board that will trickle through the economy with lower mortgage rates which also created a rally in the home building stocks today!
Over the last 6 trading days the S&P 500 has been stuck in a range between between 1826 and 1845. We have not been able to break above this upper level even though we have received better economic data (besides the recent jobs report) however, the resistance keeps the market contained from making new highs. One bad jobs number does not create a trend, however any further job reports that fall this short of expectations will reignite concerns over the recent change in the Federal Reserves direction of monetary policy.
Through the Looking Glass: My Perspective on Stocks Reactions to Market Conditions
Next week we will receive Housing Starts data and Michigan Consumer Sentiment. With housing starts I will be looking at the Home Builders ETF (XHB) at $32.85. Ill be looking for a positive report and a breakout from the the consolidation area of the home builder stocks. With Michigan Consumer Sentiment, i will also be looking for a positive report as seasonality should provide a boost in the overall economic outlook. Ill be watching (LULU) and (AAPL). Hopefully this does not fall on its face like the jobs report, where you would think the two should be correlated.
Last week I mentioned the Jobs Report, I was looking for a good report due to seasonality however that obviously did not happen!
From the Trading Floor to the Option Pit: A quick look at whats on the trading desk
S&P 500 (SPX)- I sold a Vertical "CALL" Spread at 1840/1845. This area continues to be major resistance for the S&P 500. An option gain of 41% for the week. I have again sold another Vertical "CALL" spread for next week at 1855/1860.
Twitter (TWTR)- After receiving more downgrades I bought a weekly $64.50 "PUT". I sold this for a 3 day option gain of 15%
SPDR Gold Shares (GLD)- From last week I mentioned Gold bullion which dropped below $1200 level and reached a previous low where GLD found support and then rallied 3% off this level. I purchased a FEB $115 "CALL". I sold this "CALL" option for a week gain of 86% gain as gold now trades at $1248.