• Daily Game Plan – Strong Data, Weak Action

    by  • March 8, 2013 2:14 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    Today marked the released of a wildly-anticipated employment report, and the number didn’t disappoint.  At 8:30 this morning, the data was released, and showed that the economy added 246,000 jobs(versus a consensus estimate of 178,000), and the unemployment rate ticked down to 7.7% versus expectations of a 7.9% reading.  As you might expect, markets reacted very favorably to this release, as S&P 500 futures spiked  about 6 points higher.  However, that exuberance waned quickly, as that high print marks the highs of the day so far.  After initially selling off sharply post-data, markets have regained some footing and are trading near their intraday midpoints.

    At present levels, the Russell 2000 is leading markets higher, up 0.7% on the day, with the S&P 500 and Nasdaq trailing, each up about 0.3%.  In addition to strength in stocks, metals and miners have rebounded very well since the payrolls report.  Initially, they all sold off sharply on the strong data(strong numbers=less need for stimulus=stronger dollar/weak metals) this morning, but all are in green territory for the time being.  The swoon in bonds continues, as the TLT is off by about 0.8% on the day.

     

    CHART OF THE DAY

    FLIR Systems (FLIR) – The defense-related name has been in the news lately, as the recent government sequester could potentially affect that sector going forward.  However, despite growing fears, FLIR continues to journey higher.  Since January 2, FLIR is up by over 20%.  On February 2, FLIR reported better-than-expected earnings, and the stock moved sharply higher.  Since then, it has consolidated nicely and offers a nice long entry here at the 20-day moving average.

    Despite its strong price action, skepticism toward FLIR continues to grow.  Short interest has grown by over 30% during the course of the past two weeks.  Additionally 5 of the 9 analysts covering FLIR have it rated “hold” or worse.  Continued strength could cause these bears to turn positive on the equity, which would act as a tailwind going forward.  I like an entry here with a stop on a close below the 26 level.  I’m initially looking for a move to 30, with 35 being a stretch target.

     

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    I’m still waiting for a big reaction to the jobs data.  Today’s move hasn’t been nearly what I was looking for, but sometimes broad-based moves on data like this can happen a day or two after the event.  That said, there are many names moving independent of the market.  Correlations have pulled in, and running a long/short book is optimal.  We briefly tagged the 1550 level in SPX today, and there was a swift rejection.  Keep a close eye on it going forward.

     

     

    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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