Thursday, January 7, 2010
Friday's job report: Catalyst for Lightoff or Selloff?
The market seems to be on-hold until tomorrow's Unemployment Report. Think the number is going to be better than expected and signal a reversal in the job market but the key question is how do you think the market may react? Thoughts? Either way will probably be explosive.
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I actually think that the VIX is indicating that tomorrows report is going to be a non-event. I think that most people are already expecting better then consensus. I think that in order for there to be an explosive move the number will have to not only beat expectations, they will have to significantly beat the "expected beat" by a significant amount (i.e I think a beat is already priced in). Yes that is a mouth full. But I think it makes sense. I am not putting on any plays going into tomorrow because I am expecting a non-event.
ReplyDeleteBut if I were bullish on tommorrows report, volotility is cheap right now, so a front month ATM straddle on the SPY would be interesting.
My thoughts are that unless you have some inside information or some proprietary indicator on the jobs number, why try to predict it? The consensus is usually a range and not a hard number, and the numbers are revised 100% of the time. So to me the reported number is worthless unless it's a shocker far outside the analyst's consensus range.
ReplyDeleteAny one month is not a trend, and until we would have two months of a reversal, it looks like the trend is already in place, which is continually lower layoffs. The question is when do they turn positive, by how much, and what is the slope of the positive trend line. We won't know until the future plays itself out.
The stock market has historically been a leading indicator on employment and economic activity. It was correct in the summer of 2008 when it turned down and it was correct in March when it signaled that economic recovery was coming down the road. I would say that the market is currently correct in anticipating that employment numbers will soon turn positive.
I'm not bullish or bearish but I do think it will be eventful but I'm lightening my load with this end of day rally we're seeing. I'll have a better feel with the pre-market tomorrow if the futures are up big there may be a buy on rumor sell on the news scenario if the futures are flat could go either way.
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