Jobs Report Weaker Than Expected. Market Able to Shoulder the Miss. Doldrums Might Set-in

Better-than-expected economic releases fueled a rally to new highs this week. GDP, ADP, official PMI's (EU/China), Chicago PMI and ISM manufacturing exceeded estimates. Expectations for a good jobs report today were high and the number missed by 20,000 jobs. The reaction has been muted and the S&P 500 is down slightly. Earnings season is winding down and we just had a huge round of economic releases. Congress will be in recess and traders will take time off in August. This translates into very quiet conditions. The SPY gapped up yesterday and it sat in a tight trading range until the close. Volume has been light during this rally and I don't trust it. The market could flat line for a few weeks, but there will be action within. I still like trading a mix of calls and puts to reduce overnight risk exposure. Horizontal breakouts/breakdowns after earnings are producing moves that last 2 to 3 days. Look for big “beats/misses”. The market will try the downside early. Given the strength in recent economic releases, traders should be able to look past the jobs report. The selling will be relatively contained, but the SPY could fall back below $170. Trading will be fairly active during the first hour and a range will be established. The market is likely to trade within that range the rest of the day. I suggest using a balanced approach - keep your size small. Time decay could become an issue if the summer doldrums set in. . .

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