Picture from Boston.com
By Danny Riley
Like I always say, it’s not easy being a trader. You get up early, you do your best to catch up with what the markets did overnight and then you prepare to do battle. Today’s battle comes on the first Friday of every month and it’s called the jobs numbers. Years ago it was a celebrated time in the S&P futures pit. Good or bad number, the markets always moved and volumes would pick up sharply. It’s still a celebrated trading day, but it has taken on a whole different meaning over the last five years.
Before electronic trading, traders would have to wait a full hour to trade the results of the non-farm payroll numbers that come out at 7:30. If you were “stuck,” meaning that you overbought or oversold and the 3:15 bell rang, you had to wait until 8:30 the next day. And if you got “stuck” on a Friday you had to hold the unwanted position over the weekend. It was never fun. So what do I mean by stuck? It’s just that; when an order filler has an order to buy or sell for a customer, say he had to buy 200 SPZ (big S&P in the pit) and he mistakenly miscounted and only bought 160 lots, he was stuck owing the customer a fill on the other 40 lots. And being stuck on a jobs Friday was never fun. Another way a trader on the floor gets stuck is if he has 200 SPZ to sell at the market, he tells his clerk he sold the 200 but when he counts them up he oversold on the order. Instead of just sell the 200 he sold 230, leaving him short 30 overnight with no way to get out. Another way to get stuck is when a clerk tells you to buy 200 SPZ and you don’t hear him and you find out that the customer needs them and you take the other side of the position and have to wait until 8:30 on the day of a jobs number. If I think about it I am sure there are other ways to get stuck.
According to Bloomberg : The pace of dismissals may clear the way for bigger hiring gains should U.S. lawmakers find a way to resolve the fiscal cliff of tax increase and spending cuts that will take effect next year if they fail to act. The Labor Department report today may show employers took on 115,000 workers in September, more than the prior month, while the jobless rate rose to 8.2 percent from 8.1 percent, according to the Bloomberg survey median.
In our view, Wednesday’s ADP numbers could be a good barometer. The employer service showed more people were hired than the forecast of 162,000 workers in September. Many traders we talk to on the trading floor said they think the numbers may be slightly weaker and said they think the numbers will come in lower than the median estimate, which is for private payrolls to rise by 128,000.
So what’s it all mean? With the way Wednesday night’s presidential debate went, a lower than expected jobs number will not help the Obama camp and better numbers at this stage probably do not mean much for the American voters either. The way we see it is that the potential for a “surprise” is there. With job creation pushed down so much over the last year and the election only 31 days away and the S&P nearing contract high and a load of buy stops sitting just above and all the back and filling going on, we think there is a good possibility of a positive surprise of 140,000 + jobs. See you on the trading floor in a few …
The saying is “buy the dips and sell the rips,” and we think we have already seen the dip part of that equation. We are going to keep this short and sweet. We lean to better numbers this morning and higher prices. If the pattern we have been seeing over the last few months holds, we should get an up Friday. Helping that idea along are all the buy stops that go from the high 1459s all the way up to 1465. As always, please keep an eye on the 10-handle rule and don’t forget to USE STOPS!
- It’s 6:00 a.m. and the ESZ is up .50 handles at 1456.25, crude is down 80 cents at 90.91 and the EC is trading 1.3019, down 9 ticks.
- In Asia 8 out of 10 markets closed higher.
- In Europe 11 out of 12 markets are trading higher (CAC +1.01%, DAX +0.76%).
- Today’s headline: “Stocks Advance, Oil Drops Ahead of US Jobs Report.”
- Economic calendar: Non-farm payrolls, consumer credit
- VOLUME: LOW 1.56mil ESZ and 5k SPZ traded
- SPREADS: No SPZ/H spreads traded
- FAIR VALUE: S&P -0.5, NASDAQ +0.5
“I like PBS. I love Big Bird. Actually like you, too (Jim Lehrer). But I’m not going to keep on spending money on things to borrow money from China to pay for it.” Mitt Romney as we can see, came out swinging and won the skirmish, but he is still in the spoiler role with 32 days to go. Personally, I am not looking forward to the coming headlines from the elections here or Eurozone as the austerity measures continue to play out. The BOE and the ECB rate decisions were overlooked by traders and the Draghi presser had little effect on the Romney gains. Jobless claims checked in slightly better than expected as initial claims rose 4,000 to 367,000 last week vs exp 370 with the 4-week average flat. On the earnings front, Q3 EPS growth expectations down to NEGATIVE 2.1% (from +6.6% earlier this year); also, we’ve seen the highest % of negative pre-announcements since Mar ’09. Nice breakouts in gold and silver as the metals extending their recent run. The crude market has awakened from a couple days of rest in the $92 area. Following yesterday’s pasting, down over 4%, $12 off the 3 week high, crude back and filled up to $92 area with continued unrest in the Middle East and a refinery fire on the west coast. When it comes to the black gold – bad news travels fast to the marketplace.
Morning observations: Schaeuble Says All Crisis Countries In Euro Zone But Greece Have Made Significant Progress, Spain, Italy Have Made ‘Grand Achievements’. However, the following headline came out as the spoos were starting to fade off the 1457.50 high EU SAID TO DOUBT VIABILITY OF SPANISH 2013 DEFICIT CUT TARGET.
Thursday started with 290k ESZ and 1.3k SPZ traded on Globex, trading range 1453.00 – 1444.00 / Wednesday’s RTH’s pit range was 1448.30 – 1436.00, settled at 1444.70 up 3.8 handles. Today’s RTH’s gapped 6 handles higher to 1450.50 – 1451.00 and traded 1449.00 before bouncing to new highs of 1451.50. EUBIE (08:51:10): if ya PULL the dailies / perfect Symmetrical Triangle since the 1467.50 9/14 HIGHS / RESOLUTION PINCH looks to be near. At 9:00 the Aug factory orders checked in -5.2% vs. exp -5.8%, revised previous number down .2 to 2.6%. Banks were firm again, DJT were holding their hard fought for gains, up 40ish points and crude was retracing some of yesterday’s huge losses. In the spoos, buy stops were elected above 1452 and buy programs spiked the spoos to 1455.50, then HOD 1457.50, 6 handles in 5 mins (EUBIE’s RESOLUTION) That marked a new 10 day high as chatter of Citi/BarCap buying 10K weekly SPX 1465 calls, expires tomorrow. Crude extended earlier gains up $1.25 as the spoos printed 1457.50 high at 9:11 and the treasuries were off modestly. The profit taking in the spoos, deterioration started after EU SAID TO DOUBT VIABILITY OF SPANISH 2013 DEFICIT CUT TARGET, which is nothing new, but profit taking took out the trailing stops and by 10:20 the spoos were back to retesting the opening range. Both the Nasdaq and spoos were up 10ish handles thru the lunch hour with AAPL trading down several dollars – the nazzy / tech continues to lag. The midday was stuck in sideways trade between 1453ish and 1456ish as some traders were leaning to the sell side, profit taking in front of tomorrow’s jobs number. Following the FOMC minutes the bonds dropped and the spoos held firm. At 2:45 the closing imbalance showed buy $125mil. On the 3:00 cash close the SPZ traded 1455.70 and then settled at 1455.80 on the 3:15 futures close, up 11.1 handles on the day.
MrTS has three videos today:
Roger Volz, BGC Partners
SP 500 Futures 60 min Chart and Indicator ….lower high / higher low has prices squeezing into Friday’s NFP….RBA rate cut rebound sees early stall at resistance concentration from 1445.50 to 1446.50. Rising moving averages should cushion dips, at least in the am session. Our first technical downside reversal line comes in at 1437.25
ST OB > 1462.50 /// ST OS < 1422.50
Additional intraday readings
VST 5 min ……VST 5min OB > 1445.50 at 6:35am globex session /// VST OS < 1437.50
VST 15 min …reversal retest pattern > 1443.00 to start………VST 15 min OB >1450.50 /// VST OS < 1432.50
Daily Chart Focus Levels….prominent sell wicks forming in daily candlesticks but bears have not yet been able to convert finds footing against the 34-day SMA at 1427.00
SP1 Daily Resists ….….1444.00-1446.0….1453.00.…..1460.00-1461.00……1467.00….1475.00…..1478.00…………1492.00……………1506
SP1 Daily Supports….…1438.00-1436.00……..1427.00…….1419.50 ….. 1413.00 …. 1405….1401.00/ 1399…..1390.00…….1382.00
SP1 Daily OB >1478.00 /// SP1 Daily OS < 1343.00
Weekly Chart Technical Stance and Focus Levels….downgrade to positive < 1443.50 after momentum loss < 1453.50….inside range 1453.00 / 1433.00 tightens…outside range 1470 / 1411.00 for reversal
Monthly Chart Technical Stance and Focus Levels …..positive stance > 1405 but still avoiding strong positive > 1481; now on guard for a Oct lower high 1467.50 -1451.20 (to start) ….inside range 1481 / 1405 (1357) lifted….outside range 1533/ 1273
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