Both the June Dow and S&P contracts posted new all time highs today. Not coincidentally, we are less than 16 hours away from Friday’s Un-enjoyment figure. The average guess is 170 to 200K new jobs. The buls are predicting 250K new jobs.
Since we are trading the futures market, one would have to agree that this information has been digested and priced into current levels.
If you ‘ve been reading my blog for the last year, I’ve commented that the grind higher continues in the face of a lot of bearish sentiment. There is still a bunch of $ sitting on the sidelines. This even after 2013 gave investors who didn’t over trade, a return of 30% in stock indexes, while those who tried to time the market buy shifting into gold not only forgo that 30% , but actually lost 30% buy owning gold for its 2013 swoon.
I continue to see extreme bearishness. 1 out of 3 people don’t own a stock or a mutual fund. People who saw 2008/2009 don’t want to own stocks or real estate. I did see on item that made me take notice, one person on the cable shows talking about “when is it ok to borrow against your house with a HELOC. If the general public started doing that again, but for now, most people are still sitting tight , uncertain as to what the economy holds. A couple of months of 100K to 200K job growth is a drop in the bucket of what is needed. Back during the Reagan Recovery, The average was over 230 for months in a row; Read below:
Total job growth during the first four years of the Obama recovery has been 4,657,000 or just 97,020 jobs per month. That’s not even enough to hit the breakeven level of 150,000 jobs per month when population growth is taken into account. Now, contrast that with the Reagan recovery. That generated a total of 11.2 million new jobs or 233,333 per month, more than enough to put people back to work. Reagan’s best job month garnered the very top ranking since WWII with 1,114,000 jobs added in September 1983. A single month with more than a million jobs added. So far Obama can only wish for such a total. – See more at: http://www.cnsnews.com/mrctv-blog/julia-seymour/economic-recovery-monthly-job-gains-top-100-reagan-12-obama-2#sthash.gJoSyqfC.dpuf/ Thank you Julia Seymour.
So, despite lack luster job growth, the market has discounted that and made new highs.
Are we vulnerable to a correction? Absolutely.
But I don’t see one as long as the majority of popular opinion goes to bed every night talking about when the next “big correction” will hit.
We got a 7% pull back in February, and you would have thought one of the four horsemen of the apocalypse had appeared, if you were watching the financial news.
Ironically, everyone who sold the S&PM below 1750, (1725 was the 2/5/14 low tick) : for everyone who got short on that break, they’ve lost money on the way up to 1880. that’s 162 handles of pain and embarrassment,.
The low in YMM was 15,215. I actuall bought some dow around 15,300, but unfortunately got out after a 300 point rally higher. Today’s high was 16,531. 1,200 points of rally, or 8% of a bounce.
If you have read my letter, however, I never suggested exiting ownership of physical stocks. All I did recommend was relatively inexpensive puts to be placed under your long positions. Having the puts on , should we have a correction, will prevent you from calling your broker and liquidating at just the wrong time, due to fear.
conversely, if the market trades sideways or higher, you’re only out your put premium, and you still have the benefit of owning the physical stock to hold higher.
In an atmosphere where people are litereally falling all over them selves trying to call a top, repeatedly selling futures and then buying them back can try your patience and tax your checkbook.
If you feel the need to sell every new high, make sure your transaction fee is low, and your buy stop is tight.
That’s why I like pricing puts here to protect gains in the indexes.
Tomorrow, the market could literally do anything. We may get bearish numbers and rally or get bullish numbers and break. Its a coin flip.
There are some support levels to look at on these charts of Dow June and S&P June futures below.
At 730AM, the numbers come out, and my guess is we’ll move 200 pts one way or another in the Dow and probably 10 to 15 handles in the S&P.
