• Daily Game Plan – Market Soars on Jobs Report

    by  • June 7, 2013 1:53 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    Prior to today’s open, the May employment report numbers were released, and the data came in slightly ahead of expectations.  Wall Street strategists were looking for an increase of 175,000 jobs for the month, and the reading came in at 178,000.  The headline unemployment rate ticked slightly higher to 7.6%, but there are many calculations that factor into that figure and could potentially be overstating it.  As a result, markets soared after a week of abysmal economic data.  It seemed that sentiment toward the economy soured slightly too much, and the bears were trapped into today’s print.

    Currently, stocks are slightly off their highs of the day, led higher by the Nasdaq, up 1.1% for the session.  Today’s laggard in equity markets is the Russell 2000, which is only about 0.6% higher for the session.  Bonds are getting hit hard today, off by about 1.5%, while metals are significantly lower as well.  At present levels, gold is off by over 2%, and silver is 4% lower for the day.

     

    CHART OF THE DAY

    Salesforce.com (CRM) – The cloud computing concern has been weak as of late, with the equity off about 7% since the beginning of the year.  The equity recently reported a new acquisition to broaden its business base, but the market interpreted this as a negative, and the stock sold off sharply on the news.  The thinking that most people have behind this is that CRM is unable to grow organically, so the shares are dripping lower.  Despite its weakness, sentiment toward CRM remains very bullish.  In fact, sentiment in the options market is only slightly off a bullish extreme.  This creates the potential for a bearish unwind, which could act as a headwind going forward.

    I like a bearish entry here with a stop on a close above 40.  I would initially target a move back to 37, with 34 as a stretch target.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    A move back near 1620 on the S&P 500, and then a subsequent move higher.  Indexes are strong today, but you would like to see leadership from small and mid caps.  This isn’t the case, and I think bulls may have gotten a bit ahead of themselves here and now.  Sentiment was very bearish into today’s print, so there’s a high probability that much of today’s move is short covering.  Should the SPX pull back near the 1620 level, a bullish inverse head and shoulders pattern would form, and give bulls a slight edge going forward.  If that level were to fail, then 1600 support looms below.  The more yesterday’s lows are tested going forward, the more prone they are to breaking to the downside.

    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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