Equities rallied to 10-month highs following a better than expected, but still arguably terrible, employment report. The day's excitement was sparked by news of an unemployment rate of 9.4% and a loss of approximately a quarter of a million jobs. However, stocks don't necessarily need proof of economic growth to move higher all they need is the expectation of such. This is what we are seeing now.
On a side note, Home builder stocks benefited from better than expected earnings from Beazer Home and Goldman Sachs added D.R. Horton to its "conviction buy list".
According to Fred Dickson, market strategist at D.A Davidson in Lake Oswego, Oregon. "Investors are looking for confirmation that the bottom is close and employment is a big piece of it. ISM is another piece, and put that together with durable goods and housing and the mosaic is slowly filling in that the economy is beginning to stabilize. That's exactly what investors are looking for."
Keep in mind that the equity markets look to be pricing in a "V" shaped recovery, but the economic data has not been suggesting that this is the case. Eventually something will have to adjust course in order for the two components to be in sync. Whether the numbers will improve, or stocks take a breather, is yet to be seen but my gut tells me that it will eventually be the later. That said, this has been my assumption for weeks now and I have yet to be right.
In yesterday's newsletter we mentioned that we felt as though the market wanted to go higher before it would move lower, and that proved to be the case. However, we were anticipating a little more weakness on the afternoon reversal. As a result, we can't help be look regretfully higher to our next resistance areas of 1021 and 1030 in the September S&P futures, 9,545 in the Dow and 586 in the Russell.
Have a great weekend!
* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already be factored into current prices, any references to such does not indicate future market action.
Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.
S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
July 22 - Buy cheap August S&P puts. We like the 880's and the 885's, you shouldn't pay more than $6.50
July 15 - We like selling the August 975 calls, fills ranged from $7 to $9 today.
• July 28 - We recommended to sell the 925 puts for a little over $8 to take a bit of the heat off of the 975 calls
• July 29 - We recommended to buy back the 975 and sell the 995 to give the trade a bit more breathing room and lower the delta
• August 5 - We recommended to get into a more comfortable position ahead of the employment report by buying back the 925/995 August spread and selling the September 940/1045 spread for a credit of about $3.
Russell Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.
NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
July 28 - Sell the e-mini NASDAQ at 1630 or better.
• August 3 - We recommended to buy an August at the money (1630 call) for about $600, this limits the risk of the trade to the premium paid for the option plus commissions and fees.
On a side note, Home builder stocks benefited from better than expected earnings from Beazer Home and Goldman Sachs added D.R. Horton to its "conviction buy list".
According to Fred Dickson, market strategist at D.A Davidson in Lake Oswego, Oregon. "Investors are looking for confirmation that the bottom is close and employment is a big piece of it. ISM is another piece, and put that together with durable goods and housing and the mosaic is slowly filling in that the economy is beginning to stabilize. That's exactly what investors are looking for."
Keep in mind that the equity markets look to be pricing in a "V" shaped recovery, but the economic data has not been suggesting that this is the case. Eventually something will have to adjust course in order for the two components to be in sync. Whether the numbers will improve, or stocks take a breather, is yet to be seen but my gut tells me that it will eventually be the later. That said, this has been my assumption for weeks now and I have yet to be right.
In yesterday's newsletter we mentioned that we felt as though the market wanted to go higher before it would move lower, and that proved to be the case. However, we were anticipating a little more weakness on the afternoon reversal. As a result, we can't help be look regretfully higher to our next resistance areas of 1021 and 1030 in the September S&P futures, 9,545 in the Dow and 586 in the Russell.
Have a great weekend!
* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already be factored into current prices, any references to such does not indicate future market action.
Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.
S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
July 22 - Buy cheap August S&P puts. We like the 880's and the 885's, you shouldn't pay more than $6.50
July 15 - We like selling the August 975 calls, fills ranged from $7 to $9 today.
• July 28 - We recommended to sell the 925 puts for a little over $8 to take a bit of the heat off of the 975 calls
• July 29 - We recommended to buy back the 975 and sell the 995 to give the trade a bit more breathing room and lower the delta
• August 5 - We recommended to get into a more comfortable position ahead of the employment report by buying back the 925/995 August spread and selling the September 940/1045 spread for a credit of about $3.
Russell Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.
NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
July 28 - Sell the e-mini NASDAQ at 1630 or better.
• August 3 - We recommended to buy an August at the money (1630 call) for about $600, this limits the risk of the trade to the premium paid for the option plus commissions and fees.
