Options Trader: Friday Outlook

This has been an exciting (and profitable) week already!

This morning we get the dreaded jobs report but expectations are so low (-50,000) that it will be fairly shocking if we miss (also 20,000 GM workers are on strike and "off payroll" so let’s be careful of the data we do see). Anything positive going into the weekend will be a good thing but especially a move in the Nasdaq, which is making stunning improvements on the weekly chart that have been ignored in most media coverage. That’s why we are long on tech, short on oil at the moment.

I mentioned in yesterday’s wrap-up that Goldman Sachs (GS) is on the warpath again and the financials are in for another round of downgrading each other but the SEC has put a muzzle on the hyenas so there is not as much out there to fuel a downside panic as usual. If we can get past the job report (we didn't; see update below), we should see a little dollar strength and a lot of scrambling as bets will have to shuffle back to the industrials as well as the retail sector.

Abercrombie & Fitch (ANF) has been consolidating on the $76 line for 3 months and looks ready to pop, but earnings are not until May 16th so I like the August $80s at $6.50, selling the Apr $80s for $1.45 on the assumption they don’t break out early, and then moving to a 1/2 sell of May calls. So let’s take 5 of those in the $25KP and wait until EOD to cover if we do get a pop on the jobs numbers.

The Hang Seng was closed for a holiday today and the Nikkei gave back 96 points but held 600 of the week’s 700-point gain and, more importantly, held 13,000 with no difficulty (now 13,293). India was not so lucky, as inflation fears and a slowing economy (welcome to the club!) caused them to post a 900-point drop for the week after today’s 450-point loss. The Sensex is down 25% from its median high of 20,000 and it not looking like a good place to put money to work. As I said earlier in the week, this is good for US markets!

UBS (UBS), which has written down $38Bn worth of assets, may be breaking up, and that’s being taken well in Europe ahead of our open, as they are up about half a point. EU markets are also up DESPITE an IMF report that states:

"Ireland, the U.K., the Netherlands, and France appear the most vulnerable to a further correction in home prices, it is difficult to account for the magnitude of the run-up in house prices on the basis of those countries’ fundamentals.”

8:30 a.m. Update: Ouch! 80,000 jobs lost in March, that’s pretty bad! Unemployment is up 0.3% at 5.1% and, had it not been for Bush’s relentless expansion of government, which added 18,000 jobs (not counting education), we would be looking at the first 6-figure job decline since his dad was in charge. Hourly earnings were up 0.3% too, a 3.6% wage inflation rate for employers but not enough to keep up with inflation for the poor workers.

I cannot get a clean answer on whether that includes the striking GM workers, but it’s pretty darned bad and the chance of another Fed cut just jumped 50%, causing the dollar to plunge and commodities to rise. But the markets are, so far, taking the news surprisingly in stride. Either way, I’m glad we’re well covered and we’ll see what we hang onto of the week’s gains.

This is turning into a very different type of excitement today and it’s time to grab our surfboards and get ready to ride the waves this morning. I think it’s a huge relief that we are NOT negative and we need to stay cautious, even if we get an early bounce. It’s all about the finish today and whether we hang on to the levels we’ve been watching all week.

Be really careful out there!

Comments

[cheesecake]

i wonder at what price you shorted oil ? risky play.