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How Will Friday’s Monthly Job Report Influence the Market?

|Includes: KOG, ONP, ProShares UltraShort S&P 500 ETF (SDS)

Higher-than-expected weekly unemployment claims was the main headline for Thursday, which ended as the lowest volume trading day of the year.  We had a gap-down this morning that slightly intensified.  Soon thereafter, the bulls pulled out a nice bounce that slowly worked its way higher into the close.

We continue to show support around the 200-day moving average of 1115 in the S&P 500.  If we were to break that, we should expect selling pressure towards the bottom of the recent trading range and the 20-day moving average around 1100.

To the upside, we continue to fizzle when we touch the 100-day moving average and June’s highs of 1131.  If we were to break above 1131, we would be considered an uptrending market once again.  At this point in time, we are still trying to break out of our downtrending market so we cannot ignore that.

With monthly job reports tomorrow, it was hard to be a buyer today.  This was likely a reason for such low volume.  Since we are predicting bad job reports tomorrow, any better than expected news could fuel us past resistance levels.  Since I am not interested in making predictions but rather preparing for either outcome, I reduced all my positions and bought some ProShares UltraShort S&P 500 (SDS) as an inverse ETF to hedge against my longs.  If we gap-down tomorrow morning and break lower, I will look to aggressively add to the position as a way to continue to make money as the market falls.


Kodiak Oil (KOG) reported earnings after the close and while I reduced my position before earnings, I was still bullish on the report.  KOG reported record numbers of 96 MBOE which is 112% increase quarter-over-quarter.  Other record numbers include oil and gas sales of $6.1 million (208% increase over the same period in 2009), net income of $620,000 (compared to a loss of $520,000 in the same period in 2009), and adjusted EBITDA of $2.9 million.


Even with all the records, KOG reported an EPS of $.01 per basic and diluted share, which was just short of analyst estimates of $.02.  That miss fueled an afterhours sell-off, which rebounded to only down 4%.  At current levels, KOG is still favorable to the upside, especially as crude oil prices increase.  I’ll listen to the conference call tomorrow morning and see where the dust settles in KOG before I rebuild my position.  With no debt and still much growth in the future, KOG still has tremendous upside but the CC and market sentiment tomorrow will determine how favorable the prices will become in KOG.


In other portfolio news, I sold out of my position in Orient Paper (ONP) after it rallied for about a 25% gain.  Had I been more bullish on tomorrow, I’d have likely held a smaller position and let my profits ride but, with enough long exposure in my portfolio, I decided to close it out and take my easy gains.

As always, do your own homework to see if you agree.  Have a good night and I’ll see you in the morning.  Good luck out there.


Random News:  Upon writing this, the Asian Markets are following suit with us and are down slightly.

Disclosure: Long SDS and KOG but positions may change at any time