Markets have gyrated back and forth today, but are currently trading right near their midpoint. On the open, stocks were met with aggressive buying, but that was short lived and they promptly sold off sharply. However, since then the S&P 500 appears to have found some footing near the key 1550 level, and markets are moving slightly higher for the time being. Currently, The Russell 2000 is leading markets, up about 0.5% on the day, while the S&P 500 and Dow are both about 0.2% higher. Despite strength in equities, bonds are sharply higher, up 1%, and metals are flat on the day. Similarly to bonds, volatility is moving higher with stocks, as the VIX is up about 2% on the session. It appears that many traders are positioning defensively ahead of tomorrow’s jobs report.
CHART OF THE DAY
Chevron (CVX) – The oil and gas conglomerate has been very strong as of late, up about 9% year-to-date. The shares recently spike to new all-time highs and have since consolidate back near their 50-day moving average. This trendline, currently near the 117 level, happens to coincide with a previous resistance level–the highs from September and October 2012. With CVX now sitting on this key area, it could provide support going forward.
I like a long entry here with a stop on a close below 116. I would initially target a move to 122, with 125 as a stretch target.
WHAT I’M EXPECTING
Given the fact that the bar for tomorrow’s jobs report has been lowered(weak ADP Payroll and jobless claims numbers already this week), I would look for an upside move tomorrow. Given these lowered expectations, risk/reward favors the bulls at this juncture. Pay special attention to to revisions from February, and also the reaction in currency markets. The recent positive correlation between stocks and metals could potentially reverse tomorrow if we see a number that’s far from expectations. That said, there is the potential to sell off on a good number and rally on a bad one, so focus more on the reaction than the data itself.