Thursday, May 07, 2009

April Jobs' Report May Produce Head Fake

Top Line: The pause we have been discussing is in progress. We expect more downside over the next week or so, especially with options expiring next week.

Our position is that the jobs' report will trip up several traders. The futures are higher this evening with many expecting the number coming tomorrow to be better than expected. This has the possibility of running prices up into the number and then falling for about four trading days. We are looking forward to the possibilities.

As we mentioned, we don't expect you to do anything with your long term holdings. If you don't think you can handle a drop in prices this soon, then you may want to reduce some of your stocks but this is a dangerous tactic for many reasons.

The market turned on a dime this morning as it peaked with the CSCO news on Wednesday evening (the news wasn't really all that good but the traders were hyperventilating over it). We went into bear trading mode as soon as we saw the huge opening. Of course, the immediate reversal gave us a very nice quick bear trade and we are hoping for another one on Friday morning.

During the afternoon, the Treasury bonds took a hit right after the 30 year auction was complete. By the end of the day the long bond jumped 25 basis points, or a quarter of a point. This is a big jump for one day and it may be just what we were looking for in this market to put a short term end to the selling, or more appropriately, the hemorrhaging. In terms of TLT, the price was 123 in late December and it traded into the 94's. Maybe we can get a little rally out of the bonds while the stock market lets some air out.

As we get into next week, we will be re-establishing our long positions in our trading account. At least we think next week will be the time. We will of course watch for good prices in our favorite stocks.

Happy Mother's Day

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