Stock Market Analysis

Wednesday, September 30, 2015

Pre-ISM Rally... As usual...



In almost the same fashion as last month, investors priced in the possibility of a better than expected ISM index and Jobs Report today especially after the better than expected ADP employment report, increasing the possibility (however slightly) of a better than expected Jobs Report this Friday.

This is also in line with my expectation that following the big down day two days ago, we should get a few sideways or slightly positive days as investors accumulate into the lower prices. However, what I failed to anticipate was the pricing in effect ahead of the heavy weight numbers, leading to a much stronger positive day than the just “slightly positive” that I expected.  The good thing is, inline with my expectation, I have already ordered my Master's Stock Options Picks subscribers to take a 61.2% profit on our put options positions in ESV yesterday before we get caught in a dead cat bounce like this one. See how we did it!

So, what does a day like this typically mean? 

Well, it typically means that even if the heavyweight numbers do turn out to be better than expected, the positive effects would have be extremely limited. In fact, if the numbers turned out to be only very slightly better or just in line with expectations, the market could actually start to sell off and take back the priced in good news, which was what we saw over the past few months. In fact, due to good numbers increasing the possibilities of a rate hike, whatever rally that results from a far better than expected release would also be short lived. In fact, the only thing I think will turn this bear trend back into a bullish trend is for the rate hike to actually happen and then gradually allow the positive effects of such a fiscal policy to start showing in the economic data… this is a process that could take months after the rate hike actually happens and this bear market runs its course. Until then, with the rate hike hammer hanging over everyones heads and economic conditions generally weaker than ideal, this market remains one in which betting to downside continues to be the smart move. 

The internals today did not convince me that it is a truly positive day today either. Bond yields barely moved and total equities dived in favor of call options (learn about what Call Options are for free)... these are usually indications that put the odds in favor of today being a fakeout rather than a reversal. In fact, I would use this as an opportunity to get into more puts. (Don't know what puts to buy in this condition and when? Join my Master's Stock Options Picks service now!) 

Market Crash Timer: ORANGE

For now, the US market turns a short term neutral trend within an intermediate bear trend and primary neutral trend.

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