Traders Corner   15 comments

What a difference a day makes! After yesterday’s big drop in the S&P 500 (-1.32%), the Williams %R went from overbought to oversold (-96). While other technicals dropped, nothing is showing an oversold condition yet.

However, don’t read too much into this. The last three times the S&P 500 has seen drops like yesterday’s, it proceeded up to new highs within a month.

The thing to watch is today’s U.S. Employment Report. Yesterday’s move was a sentiment move based on the GDP Report, not a technical move. A bad jobs report could wipe out yesterday’s losses in one day. Remember, bad news is good news for markets, in the perverse QE-land in which we live.

But what if the jobs report is inconclusive? The S&P 500 is sitting right above the 20 day moving average, which seemed to support it yesterday. We may see a flat market in that case.

On the other hand, a good jobs report could push the market down to the 50 day moving average. A 2+% drop could happen.

The S&P 500 levels to watch today:

UPSIDE: 1752-1755 (6 data points), 1759 (2 data points), 1761 (November 4th’s low), 1764-1768 (4 data points), 1773-1775 (2 data points, October’s high and the all-time high), and 1790 (top of the Bollinger Bands).
DOWNSIDE: 1746 (November 7th’s low and the 20 day moving average), 1729 (September’s high), 1709 (August’s high), 1707 (50 day moving average), and 1703 (bottom of the Bollinger Bands).


15 responses to “Traders Corner

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  1. I added SPXU in the pre-market at $18.11. That jobs report was better than expected, even at the top of the consensus range. Look out below!

  2. Ed

    What are your thoughts in ICON? They have had a big run up in their share price but still sport a low PEG and good free cash flow.
    Interesting business model and collection of assets including the Peanuts comic strip

    • Ojunker,
      I don’t see the FCF you’re seeing, but otherwise ICON’s financials look solid, except for a high debt/equity (125%). They look ok. A little cheap for the expected growth.

  3. Marshall, I’m thinking of doubling my BAC warrants. I know this is a stock you own and watch. What do you think.

    Doubling will get me to a full position.

    • Jeff – interesting that you should ask as I had also noticed this morning the pullback. If you are patient and have a time horizon running through 2019, I believe it is a good investment at the current price. But for me, as I already have a full position, I am going to wait and see if I get a fire sale price. No indication that will happen, but the market does go nuts from time to time. When I do my modeling, I derive a price between 9.33 and $15 at expiration, which is essentially annualized growth between 10 to 20%. In addition I own HIG warrants. I have a slightly better modeled outcome for them, between 13 to 19% per year.

  4. I sold SPXU at $17.63 and a 2.65% loss. Apparently, the market is reading today’s jobs report as mediocre. Personally, I see that as dangerous. If the November jobs report is anything like this one, I think tapering could be a stronger possibility for December’s Fed meeting. If the market charges into the Fed meeting at full speed, and the Fed tapers, we could see a monster crash like we’ve never seen before. Fortunately, we still have a month before we find out.

    • Ed, I’m surprised you didn’t hold this position. Since you are long everything else, a small insurance policy would seem to make sense.

      • I’m not going to hold it into December, and I can always buy it back if I see the market turning. Today’s move was overly bullish, so I’m sure I’ll get another opportunity soon.

      • Wasn’t thinking into December. Just into next week, especially since today’s move was overly bullish.

  5. Ed, So I just looked, the ES bottomed at 1737 at around 8am and started driving higher off that. If I had known that today at work I would have bought upro. So b wave top was 1770 and c wave bottom was 1737. Wave 5 started I think? We should move into the upper 1700’s early next week, maybe even 1800.
    What I’ll be watching next week is a drive higher into the 1800’s and wait on a pull back that holds support at 1775 which was wave 4 peak. If we do that I’ll expect we keep going higher.

    Trader, Did Russell 2k tell you anything today? I noticed it was up quick and market lagged.

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