Jobs Report Blows Away Estimates – Market Has the Ammo It Needs To Breakout

Posted 9:25 AM ET - (Pre-Open) - The long-awaited Unemployment Report was released this morning and it blew away estimates. In April, 288,000 jobs were created and analysts were expecting 215,000 new jobs. The market has all of the ammo it needs to breakout to a new high. The reaction has been relatively muted. Traders (myself included) don't trust the number - it is filled with seasonal adjustments. Initial jobless claims have been creeping higher the last two weeks and ADP was good, but not great. There is inconsistency between the reports. It is important to remember that 300,000 new jobs are needed just to keep pace with the workforce. This seems like a great number, but it is still below the level we need for economic expansion. I can draw one conclusion from today's report. This number will keep hope alive. If the market does decline, the move will be brief and shallow. I will exit my put positions on any weakness. The price action today will be choppy. I believe the market will test the downside early and it will follow the post-report pattern we've seen the last two months. Once support is established, it should rebound quickly. That momentum could continue into the close and the market will finish at an all-time high. If the market closes on the high of the day, buy a few calls. Wait for confirmation next week and add to the position. Keep your size small! I'll be exiting my put positions today. I will wait this morning to see if the downside is tested. If I see a rally unfolding and the move gains traction, I won't waste any time getting out. My position is relatively small and my losses will be contained. I will day trade from the long side if we do breakout, but I won't take any overnight positions. I still don't trust this number and I believe Asset Managers are in risk reduction mode (profit taking). I can't embrace this rally until I see additional proof that economic conditions are improving in the US. I also want to see stable activity and stable credit conditions in China. This was a good number, but it is only one number. GDP was dismal, retail sales are barely keeping pace with inflation and corporate guidance has been cautious. Temper your excitement and see how the day unfolds. One way or the other we should see some action today. . .

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