Friday, June 04, 2010

Friday June 4th stock market commentary

The jobs numbers came out this morning. It's obvious that the government was responsible for job creation by hiring Census workers. Private sector jobs were up only 41,000 jobs. This was taken by the market very negatively. The Dow Futures before the report were at -60, but after the report they dropped to -200. I expect this to start the decline in the markets and to follow my predictive pattern I posted here in previous posts and repost today below, as well as what the market has done since this prediction.. This is going to be a bad day and Monday should follow through on today's drop.

You will notice from the chart above that the Eurozones Blue Chip Index looks bad and was pointing down even before the Jobs report, but the jobs report drove all of Europe's Indexes lower. Most are down about 2.5% currently.

I will add Updates on this same post during the day with comments and charts, so come back and see what has been added.

I am thrilled I am on the right side of this trade now by selling my TZA Puts yesterday and Buying the TZA Calls. Remember TZA is an ETF Ultra Short of the Russell 2000 index, symbol $RUT. So buy buying TZA Calls, the purchaser believes the Russell 2000 will be going down. TZA is a Triple short, meaning that for every 1% move down on the Russell 2000 Index, TZA moves 3% up. It is one of the most leveraged Option plays in my view.

Update: 7:00am PST
With 1/2 hour into the trading day, the Dow dropped down as expected about 205 points, but has recovered only about 25 points off the bottom. I haven't posted the Intraday chart yet, but it looks like a "w" pattern was formed and is slanted down. So I believe we will take out the current lows of the day and go lower.

Update: 9:40am
As the Intraday chart above shows we did go lower this morning. But if you look at the red line I have drawn, it points to even lower levels between now and closing. In view of this I purchased more TZA Calls for October for $1.50/share with a Strike Price of $9.00

Update: 11:00am PST
OK, here is the proof in the chart above that we did go lower. I do not know how low we are going today but several things are noteworthy. First, the volume is high today for this time at 120 Million shares traded on the Dow. Also, the Put to Call ratio has moved from 0.60 in the first 1/2 hour of trading to 0.91 this hour.

Update: 12:40pm PST
There's 20 minutes to go before the market closes. The key today will be if the Dow closes at the lows. If it does, it may mean a reversal of the market next Monday or Tuesday. If it doesn't, we have more downward momentum to go. Stay tuned as we are down 346 points!

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