Yesterday certainly went according to our plan!
The futures bets I mentioned in the morning post made a ton of money as we hit our targets to the penny and both the Dow and Russell short contracts had amazing returns (note huge bearish engulfing candle we played perfectly on the Fizbozachi chart). We have to thank our man Cramer for a huge score yesterday on AMZN, which I also mentioned in the morning post. We went with our plan in Member Chat yesterday, selecting to sell the naked Dec $145 calls for $5 right out of the gate and later we collected $3 from Cramerites for the $150 calls.
Both closed yesterday with roughly 50% gains for us – probably not so good for the BUYBUYBUYers though. Yesterday Cramer attacked our position on SRS and told his minions to IGNORE the naysayers on Commercial Real Estate and buy the IYR. Unfortunately, IYR is not a marquis name so it didn't get a lot of participation on his call but we will certainly be back in more SRS if it hits $8 again.
The Jobs Report is at 8:30 and we're really not sure which way that number will come out (we were sure but the White House confused us by pre-announcing yesterday that the unemployment rate "might tick upward" despite what we see as favorable seasonal adjustments – see yesterday's post as well as Barry's excellent outlook). Now expectations are way low so even a pretty poor result can be met with some relief and we already had a nice sell-off yesterday so we're not looking to be greedy as we are ready to protect our now very short virtual portfolio from a possible bounce but still hoping the jobs data is the nail in the coffin for the bulls this week.
Not much happened overnight as Asian markets traded fairly flat on no particular news. Of course fairly flat is an odd way to describe a Nikkei that was jammed over 10,000 right at the close but that was nothing compared to the Hang Seng which "only" lost 55 points after dropping 320 until lunch when suddenly they had to BUYBUYBUY to get back to the 22,500 line – which, sadly, they failed to hold by 2 points. Take a look at that 5-day chart and think about how much money you can make just buying into the HSI right after lunch every day (or you can just show up and buy before lunch, come back before the close and sell). Anyone wishing to take a field trip to Hong Kong, let me know!
Europe is down half a point just ahead of our jobs data as everybody is worried about our jobs numbers. The ECB announced the have a planned phase-out of the stimulus and that's keeping the dollar weak but not enough to help gold and oil, who are both hanging around yesterday's lows.
8:30 Update: Jobs were a total blow-out! Man did those White House guys fool us… This is great news for those who took the futures play (special Alert for Members went out at 6:13 this morning) but very annoying for the larger virtual portfolio as we had kept our bearish stance into the close yesterday. In the Alert this morning I had said: "So my conclusion is the pump-monkeys are on the march and, unless the jobs numbers are a clear problem, there will be an attempt to move the markets higher but these are short-term plays with tight stops (see yesterday’s notes). I would be surprised to see the S&P over 1,107 and $76.50 should give oil trouble, maybe topping out at $76.75 on a good run pre-market. RUT 590 and gold $1,207 should confirm that it’s a good idea to play the S&P and oil futures but do keep in mind these are super-dangerous."
Interestingly, gold is heading lower as Jobs move higher as the dollar is bouncing hard (more jobs creates demand for dollars) so this is going to be great for our gold shorts at least. We're going to be back to watching the top levels we saw yesterday but these are the seasonal adjustments I was talking about in yesterday's post so we are going to sell right away in the futures and take it off the table, putting us back to 60% short at the open. Unemployment is officially down to 10% again
I am just blown away by the con game being played with the markets as we got a very rare report directly from White House Spokesman Robert Gibbs at around 11 am yesterday saying: the White House has seen signs that the U.S. unemployment rate to be announced on Friday "might tick upward." Hopefully, there will be an investigation as to why Gibbs decided to pre-release information that turned out to be 100% wrong so that the average investors were forced to SELLSELLSELL all afternoon while only professional sharks (like us and our friends at GS) were able to take advantage of the move up in the futures where the 8:30 data-point will be old news by the time the market opens.
In November, employment fell in construction, manufacturing, and information, while temporary help services and health care added jobs. Digging a little deeper into the data we see that, among the unemployed, the percentage of people who have been unemployed for 27 weeks or longer rose 2.7% to 38.2%. Construction employment fell 27,000, Manufacturing lost 41,000 jobs, IT lost 17,000 jobs, Retail added 8,000 jobs and Health Care put up another 21,000. The big upward change was Professional and Business services, which added 86,000 jobs despite the very poor ISM report we got yesterday. 52,000 of those jobs were temps. Last month also got a huge upward revision from -190,000 to -111,000 so it's back to watching those breakout lines for us.
EWJ is a nice way to play the breakouts as Japan has a lot of catching up to do if we break out and a stronger dollar coupled with more workers is just what Japanese exporters want to hear. The Jan $9s are $1 with almost no premium and make a nice upside play on Japan. This will also be great for our TBT plays (see last night's comments for new play there). Our watch levels remain: Dow 10,495, S&P 1,113, Nas 2,205, NYSE 7,266 and Russell 605 and those were the places we shorted yesterday to great effect when they couldn't all cross the line on the morning spike. Today will be similar but we'll be a little more balanced going into the weekend most likely.
Have a great weekend,
– Phil
