Well the NFP number did what everyone expected it to do, showing some dismal employment figures. Thinking in the present, I think we are at a max pain point perhaps, and decided to go long the SPY Weekly May $138 call. Here are my reasons for that thinking:
1. A lot of bad econ data was out this week sending everything lower (stocks, precious metals, commodities). We may be at a climax point today with the NFP report that came out. Looking ahead to next week, econ data is very light, and trading volumes and implied volatility could be lower.
2. The bearish H&S pattern that formed in the SP500 met its price objective today, which usually means that we will see a little reaction move to the upside.
3. There is confluence of the H&S target and the Weekly S1 pivot level at 1372, which is the area that the SP500 is currently trading in. I think this may be a meaningful support level. Monthly S1 is at 1373 so we are right there with last price at 1371. If prices can reverse today and close above 1372.55, I would consider that a very bullish daily candle, representing a false move lower.
4. SP500 is way outside of the the -3 ATR channel and Elder impulse has gone from red to blue on the 30 minute chart so we may be building some meaningful buying interest here. MACD negative amplitude is starting to bullish diverge after having hit its extreme low for the day (thus far) – see chart
Crossing my fingers that these technical reasons are enough to cause a bounce, and relying on some Large cap heavy weights like CSCO and PCLN to cause the broader market to get a bid next week when they report earnings.
5/8 Update – see V shaped reversal that happened back in April. If we are able to close above 135.79, I think it could be possible that we see the same thing happen.
- The Ticker: SPY
- Target Price: 1.70 per share
- The Trade
- Buy to Open May 2012 138 Calls at .89 or better
- Trade Opened: May 4, 2012
Chart courtesy Finviz. Click to open larger.
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