From a holding pattern, bulls move into a slightly more defensive position in front of Friday’s jobs data. As of the lunchtime hour, the SP-500 is (SPY) is off 0.50% and taking a second straight stab at “Sell in May” seasonality below 1400.
Thursday’s officially-sanctioned data has proven mixed and fallen short of giving bulls the confidence to hold the 1400 level in front of tomorrow’s, always closely-watched and maybe more critical than usual, BLS nonfarm payrolls data.
Pleasing analysts this morning, though not necessarily investors, weekly claims fell by a much stronger and more pleasant-than-forecast 27,000 to 365,000 versus estimates of 375,000. At the same time, continuing claims fell by 500,000 to 3.28M and proved pleasing to the eye and moving to the bullish masses for a short while at least.
Separately and anecdotally a decent support for bulls, labor costs rose by a more modest 2.0% compared to the Street’s 3.0%, while productivity dipped by a much milder 0.5% versus views calling for a dip of 0.8%.
In the other hand, economic evidence assisting Thursday’s somewhat disgruntled bull, an intraday report from the ISM Non-Manufacturing Index showed a dip above the expansion line to 53.5 for April versus March’s 56.0 reading and forecasts of 55.5. The release caused a minor stampede lower of about 0.40% before bouncing back to pre-report levels just under the unchanged mark and slightly above 1400.
Also causing a bit of a mixed stir, an announcement by the ECB to stand pat on interest rates while cautioning economic downside risks remained a threat to the Eurozone wasn’t taken fully in stride by traders as overseas bourses finished the session fractionally mixed after sporting more uniform intraday gains.
In those other sometimes intertwined markets of influence, the US Oil Fund (USO) is leading to the downside with investors taking a bearish cue from OPEC which stated it was “unhappy with high prices” according to CNBC.com.
Thursday’s mixed data and concerns the ECB isn’t acting strongly enough to prevent additional “R” tags popping up for its member economies aren’t helping matters in the USO either. Technically, today’s -2.25% price drilling in USO is posing a serious threat to a breakout attempt this week from a 10-week long consolidation.
The iShares Bull ETF (AAPL) is trading mostly flat and demonstrating relative strength but off about 1% from its intraday highs which looked to confirm a pullback test into the 50SMA.
The US Dollar (UUP) is holding the line, in this case, the 200SMA for a second session, up 0.20%, after gapping above the key longer-term moving average Wednesday. In turn, dollar-denominated commodities like silver (SLV) and gold (GLD), coupled with raised concerns for the Eurozone and global economies, are under pressure with losses of 2.15% and 1.35% respectively.
And somewhat interesting, despite bearish splintering in the market, the CBOE Volatility Index ($VIX) is only up 1.55% near 17.0%. The action marks a fourth day in which the sentiment gauge is butting heads with its 10, 30 and 50SMAs while toying with a rather historically neutral level.
Finally and in those sometimes accurate heat-seeking option markets Green Mountain Coffee Roasters (GMCR) is seeing frenetic activity with shares off a scorching 48% following the company’s slashed outlook below Street views. In Wednesday’s Option Watch column we correctly diagnosed respecting GMCR’s through-the-roof, “Buy 200%” implieds as a strong warning flag its history of outsized earnings reactions would likely continue.
What’s next or who’s next? As discussed in today’s Market Barometer, SodaStream (SODA), with shares now off about 10% and whose options are seeing a bit of above-average interest with earnings on-tap next Wednesday; seems like a flavor of choice for bearish hedge hogs to investigate further.
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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