Market Likes the “Hot” Jobs Number – This Will Take Its Toll In A Few Weeks

August 5, 2016
Author: Peter Stolcers, Founder of OneOption

Posted 9:40 AM ET - The market has been trapped in a very tight range between SPY $215.50 and $217.50 for three weeks. We are right in the middle of it today and we should challenge the upper end of the range. Trading volumes have been dismal and activity should slow down after the first couple of hours today. In July 255,000 new jobs were created. That was much better than expected and the market is rallying on the news. I don't trust the move and I'm going to watch the price action the first 30 minutes. If we grind higher and challenge $217.50 we need to breakthrough. I expect to see selling pressure at that level and if the momentum stalls the market will reverse. Even if the jobs reaction is market friendly today, the news will take its toll later this month. Traders will worry that a September rate hike might be possible. Employment is improving and Brexit was a non-event. August and September are traditionally weak months. Politicians and bankers are on holiday and investors tend to get nervous. With the market at an all-time high Asset Managers will not chase stocks. Some will take profits ahead of seasonal weakness. We have been finding excellent day trades this week. Many stocks have been trending all day even though the market has been flat. Biotech and small cap stocks have been strong. The news will dry up next week and we are likely to chop around in the range. The market is wound tightly. Keep overnights to a minimum until we breakout of the range with follow through the next day. Today I suggest waiting before you jump in. I believe the early rally is a trap. If the market stalls I will trade from the short side. If the market holds the gains and chops around I will trade both sides. My searches will help me find relative strength and weakness. I do not plan on trading the afternoon session. . . image

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