Some of the words used to describe Friday’s highly anticipated NFP/ Employment rate trade in IBD edition this weekend include…”almost as if market took off early for a phantom holiday…volume slouched.. Market decided to celebrate a silent film actors birthday….near silent…yawn.
If you waited to do a reactionary trade all week off the NFP on Friday and avoided trading the volatility prior to it, you were left mumbling the same IBD words and missed plenty of trading opp’ before it. If you don’t think outside the box in this market, you're left out. Fortunately, here we try to think ahead, if our ideas don’t work..that’s fine, at least we're all prepared and if the ideas work, you’re a step ahead of the herd. Last week, this included a potential reversal off 1027, the prospect of the market ‘getting it all back’ on Thursday after the FOMC late sell off and the possibility of a ‘ flat’ trade on Friday where nothing happens and we get an ‘exhaustive’ day. You may be able to spin Friday’s report to get something good out of it, but, let’s be realistic the numbers were ‘horrible’ and many previously said 10%+ headline would cause a ‘ big sell off’.
Earlier last week, we were asking what does this market want to move to another leg up. …One thing we thought the market may need is …“…or have 10% unemployment hit finally to blend everything together and have a big day leading to the next leg up”. The premise of having a 10% tape finally hit was what the smart money was trading on Thursday prior to release, the consequence was a flat day as most shorts were already pressed out on Thursday and no conviction buyers were ready on Friday. Why would any new money come in on Friday after the such a horrible number? If you were sidelined, you were also just scratching your head and asking what the market was doing not selling off. This equalled a draw in the boxscore. Anyways, the question in our mind is if the 2+% Thursday was the "big day" needed for another uptrend without the usual big volume to indicate such a move??. A close of 1067 or higher is/was crucial for the Bull frame of mind, a push over 1074-1075 puts the ball back in the Bulls court for a 1100+ close into the New Year. An upside reversal week was completed from 1027.
We have a rather slow eco’ data week, but this doesn’t mean the volatility will stop. It might not be as crazy as recently, but the $USD will continue to provoke moves. A potential USD correction is a possible ‘roadblock’ and the wake of the employment numbers is still to be determined, eventually the talk may turn to a labour market recovery stall. Until one or both of these things occur, trading life goes on with what we have to work with day to day.
In all the broad market excitement, a few names emerged that we like, MELI following earnings and PEET after EPS/DDRX combo’