The Tide is High, Bulls Holding On
The bulls used their lifeline this morning on Who Wants to be a Millionaire as they called up the Labor Department and asked them for a favor. The question of the week came down to the nonfarm payroll numbers and the bulls were looking for an answer north of 200,000. They got it after hearing corporate America went on the biggest hiring spree in five years.
In a pleasant surprise, the Labor Department reported that the private sector added 268,000 jobs for the month while at the same time we got some of the zombies off the government’s payroll. Overall, the economy added a total of 244,000 jobs last month, which was well ahead of estimates for 185,000 jobs that analysts had predicted. Even better, it was the third straight month that featured an increase of more than 200,000 jobs.
The unemployment rate did rise slightly to 9%, up from 8.8%, but was due to more people looking for jobs which is also a good sign.
As a result, the market soared on the news as the bulls take a turn at testing resistance which was prior support. So let’s see where we are at as we head into next week.
The Dow is up 60 points to 12,645 but has traded up to 12,759. We said to watch the 12,800 level on the way back up so this area will be important to overcome if the bulls want to push Dow 13,000.
The S&P is higher by 6 points to 1,341 and has traded up to 1,354. Once again, the bulls face a major hurdle at these levels but if 1,350 is cleared into the close, the bulls will be looking for a pop up to 1,375 next week.
The Nasdaq is showing a 19 point gain and is at 2,834. The 2,850 level is also key on if the rally can be sustained as this area has been a major headache for the bulls. The index touched 2,859, intraday.
Oil is down slightly again today after tanking nearly 10% yesterday. Black gold closed below $100 a barrel for the first time since mid-March and is currently at $99.02 a barrel, down 72 cents.
Silver has gotten crushed all week, including Thursdays 8% selloff, and is down $1.38 to $34.76 an ounce. We played the silver trade a few months ago but have sat out the recent volatility despite great conditions for strangle trades. We mentioned silver traded near $50 last week and is down $15, or 30%, off its highs. It has been the biggest weekly decline for silver since 1975.
And finally, gold is at $1,483 an ounce, up $1.60 for the day.
Its been a rough week for the bulls but we had penciled in the pullback which is healthy for this market. Today we are getting a bounce.
We arent sure how much selling pressure will come next week but we do know that we are getting a nice setup right now to play the next major move in the market. There will be clear signs on if we are headed for a correction or if this week and next week represent good buying opportunities.
The S&P 500 Volatility Index (^VIX, 18.14, down 0.06) traded down to 14-and-change last week which is where we have been saying to start looking for a pullback. We thought there could be a dip down to 13 but we were a day off as this index has been rising all week and gauges fear in the market place.
For you are a new subscriber who may not know, the VIX rises when the market falls and vice-versa. A rising VIX means the market is nervous and favors the bears while a falling VIX is good for the bulls. Usually, a reading under 20 indicates confidence and calm while a reading above 30 indicates fear and panic.
We will be back Sunday night with our Weekly Wrap as we have 2 more new companies we will be profiling. This publication is for those of you who like to buy stocks but also want some exposure to options. Our portfolio is based on recommendations we feel will easily make you monthly double-digit returns and all 10 of our trades are up for the year. We try to find undervalued, or momentum stocks, that are good candidates for the portfolio to use with our covered call strategy which reduces our cost basis.
If you are serious about building a long-term well defined portfolio that is a little less risky than trading options outright, then this publication is for you. The Weekly Wrap also profiles earnings every week and we highlight companies in bold that could see their share prices move 5%-10% or more after announcing.
We also profile some strangle and straddle trades from time-to-time in our Weekly Wrap which is quickly becoming the fastest growing covered call newsletter on the internet.
We are going to run a special this weekend for our Weekly Wrap because we want to see you Sunday night. So, for those of you who want a deal, here it is. If you sign-up for a 6-month subscription to our Weekly Wrap publication this weekend, we will add 6-months at no charge.
Have a great weekend everyone and rest up for next week which should be exciting. We plan to be pretty active with our trades next week…
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