Market Needs A Goldilocks Jobs Number Fri To Break Thru Major Resistance

March 3, 2016
Author: Peter Stolcers, Founder of OneOption

Posted 9:30 AM ET - Yesterday the market probed for support early in the day and it held the gains from Tuesday. Buyers gradually pushed stocks upward and we finished on the high the day. The S&P 500 is 10 points away from the 100-day moving average. That resistance level should hold ahead of the Unemployment Report Friday. ISM services will be posted 30 minutes after the open. A number above 53.5 would be bullish and a number below 52.5 would be bearish. Friday's jobs number should come in around 190K. That would be consistent with initial jobless claims numbers the last few weeks and the ADP report from Wednesday. This would be a Goldilocks number. It is strong enough to suggest economic stability, but not so strong that the Fed would change its rhetoric on March 16th. A number below 160K would be bearish and a number above 230K would also be bearish. Anything in between will be market friendly. Central banks have been printing money like mad and the ECB could ease next week. This has been the primary market catalyst. Emerging markets are moving higher and cyclical stocks are rallying. I would not trust the rally in energy, emerging markets, basic materials or heavy equipment. This is a bounce and these stocks will be ripe for shorting when the market rally stalls. I sold bullish put spreads when the SPY rallied above $195 Tuesday and I added to those positions yesterday. This options trading strategy allows me to distance myself from the action and to take advantage of time decay. The short strike price is below the breakout. If the breakout fails, I will buy back the put spread. If the SPY falls back below $195, I will buy back the put spreads. Every day that the market holds this level, the positions become more profitable. The news will dry up next week. We will get a few numbers from China and the ECB statement. The next big domestic news is the FOMC meeting on March 16th. The Fed will not hike and the rhetoric should remain dovish. I believe that SPY $195 will hold through March options expiration. Bullish markets open on the low and close on the high. We've seen that pattern the last couple of days. Let the early weakness run its course and look for opportunities to day trade from the long side. Use the first hour range as your guide. The market is close to major resistance at SPY $200. Unless we get an unexpectedly strong ISM services number greater than 55, I don't believe we will break through it today. A Goldilocks Unemployment Report tomorrow might push us through. We are likely to see a quiet day today. Look for an opportunity to day trade from the long side and know that resistance is close. Set targets and take profits. . . image

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