• Daily Game Plan – Good Data, Ugly Action

    by  • December 7, 2012 1:47 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    At 8:30 this morning, the November Nonfarm Payrolls report was released, and the data was very good.  Analysts were calling for the addition of 90,000 jobs for the month, but the actual number showed an increase of 146,000 jobs.  Additionally, the headline unemployment number came in at 7.7% versus expectations of an 8.0% reading.  As you could probably expect, markets spiked sharply on this data, with S&P 500 futures moving about 13 points in only a few minutes.  However, the euphoria quickly waned, and that dramatic move higher has faded all day.  At present levels, the S&P 500 is up less than a point on the day.

    A very popular mantra in trading is “Pay attention to the reaction, not the data itself.”  Given this, today’s move lower after positive data isn’t a good sign for the bulls.  However, the late-morning selling has abated, and the potential for a rally still exists.  If you take a look at price action in both bonds and commodities today, that could be a clue that there is still an appetite for risk — bonds have been sluggish all day while commodities have seen positive price action.  I’d say markets are well balanced here, and both bulls and bears have an equal chance of taking control going forward.  Trading is all about playing probabilities, so at least be cognizant of the fact that this could go either way.

     

    CHART OF THE DAY

    Iron Mountain, Inc. (IRM) – IRM is a records management company that helps customers remain in compliance with specific laws.  As you’ll see the stock has seen quite the pullback, from nearly 36 all the way to under 31 today, in a matter of a little over a month.  Despite the recent swoon, IRM is still up about 15 percent on the year.  Today’s pullback level coincides with previous resistance seen in mid-2011, and this level could now act as support going forward.  Additionally, the candle printing today is called a “dragonfly  doji,” which oftentimes signals trend reversal and selling exhaustion.  This looks like an opportune place to enter a long position with a stop below 30 and a target of about 35.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    I remain stubbornly bullish.  The intraday move today isn’t exactly comforting, but the path of least resistance for markets remains higher.  It doesn’t appear as if we’ll break the recent range today, but there are plenty of opportunities for markets to do so next week.  If we do breach 1385 on the S&P 500 to the downside, it will likely be time to flip bearishly.

    About

    Bryan Sapp is a Senior Trading Analyst at Schaeffer’s Investment Research, where he has specialized in volatility-based options trading since early 2010. With Bryan at the helm, Schaeffer’s Volatility Trader generated a 2012 portfolio return of 70% for subscribers. This real-time option recommendation service exclusively trades short-term straddles. Prior to joining the research team at Schaeffer’s, Bryan honed his skills as a speculator by trading his own account, and playing poker professionally to pay his way through college. Bryan attended the University of Louisville, where he received his Bachelors in Economics and an MBA with an Entrepreneurship focus.

    http://www.schaeffersresearch.com/

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