Weak Jobs Report Will Reveal Support – Next Big Market Move Is Up

WATCH US MAKE MONEY IN THE CHAT ROOM - CLICK HERE FOR THE FREE TRIAL Posted 9:30 AM ET - It's funny how the Unemployment Report used to be a focal point. With daily 30 point S&P moves, it has been anti-climactic. For many months the number has come in around 200K and the release has been a yawner. That is not the case today. Today we learned that 142,000 new jobs were created in September. That was below the 200,000 jobs that were expected. We are in an environment where good news is good news and bad news is bad news. The Fed desperately wants to raise rates this year. A 250,000 number would've been consistent with that goal. This number will put the Fed back on its heels. I did not believe that we would see a rate hike in 2015. The Fed does not want to dampen spirits heading into the holiday spending season. They will not raise rates until March. The S&P futures were up 12 points before the release. Now they are down 20 points. I welcome the move. The bid is strengthening. Yesterday, the market was able to overcome negative news. Russian airstrikes in Syria, a soft ISM manufacturing number and the debt ceiling did not spark selling. In fact, the market was not even able to challenge the low from Wednesday (SPY $189.50). That support will be tested this morning. Major support is at SPY $187.20 and that is in striking distance. If we do, I don't want to spend much time there. I will be looking for a bounce off of the closing low from August (SPY $187.20). I believe a double bottom is forming there. This week I've been selling out of the money put credit spreads in October. The decline today won't even faze me. If the market were in rally mode this morning, I would have been faced with a tough trading decision. I don't want to chase until we get closer to earnings season and I would have been tempted. This drop will allow me to gauge the selling pressure. Asset Managers will be waiting for support and when they see it, they will jump in. They do not want to miss a year-end rally and they want to get long ahead of earnings season. Earnings should be relatively good and they are the only thing that can restore confidence. Valuations are attractive at this level and bond yields remain at historic lows. Corporate buybacks are at record levels and stocks will rebound. I am not looking for a massive rally, but we should be able to get back to SPY $200 in November. I will let this wave of selling pass. If we find support at $189.50, I will sell put spreads today and I plan on shorting VXX (I will scale in over the next week). If the market challenges $187.20, I will monitor risk and wait for support next week. I will also day trade from the short side and this will help me hedge some of my bullish put spreads. I will not carry any overnight short positions. I believe a major market low is forming and that the next big move is up. The decline today will reveal support and it will set up an excellent buying opportunity. Have your bullish stocks lined up and be ready to sell some put premium. Every year the market looks horrible in September. Pessimism comes crawling out of the woodwork and a year-end rally seems unlikely. Bears get short on the notion that "this year is different". By the end of October the market is in rally mode and they are scrambling to cover losses. We might not get a huge rally this year, but we certainly won't tank. Sell put spreads. . .

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