Bulls celebrate to close out the week on better-than-expected payrolls data suggesting an intact "jobless recovery." As of the Closing Bell, the S&P500 (SPY) is up 1.41% and confirming a not-so-simple four day corrective schnitzel from a historic multi-month running of the bull.
It almost didn't happen or appeared to be in jeopardy. Market watchers tuning in to Friday's unofficially-sanctioned three and three-quarter day market holiday can certainly attest to that. We're referring (of course) to trader reaction to better-than-expected but still staggering monthly non-farm payrolls losses of 215,000 versus consensus views of 225,000.
The closely-watched pre-market release found bulls stumbling immediately following the report, quickly reversing higher to surpass prior "bid" highs and then fall flat before the Opening Bell. Out-the-gate, traders managed a very underwhelming but fractional celebration of relief for the first hour or so out-the-gate.
Finally and deeper into the hushed sounds of an emptying NYSE stock exchange with its auto-pilot buy programs turned on; financial rags were graciously allowed to paste headlines along the lines of "Wall Street Finds Relief Bid On Jobs Data." "MOOyah!"
Stealing from earlier penned market commentary, "Following weak ADP and claims data this week, traders were likely bracing for weaker-than-forecast results from today's closely-watched jobs data." That being said, Friday's jobs report did confirm a nasty jobless recovery continues to trend in the desired direction for the economy and bulls apparently.
Of secondary interest and slightly less pleasant, unemployment climbed to 9.7%. That level marks its highest since 1983 and came in worse than estimates of 9.5%. That's no laughing matter. However, the good news, if any, the figure is moving towards Wall Street's expectations for double digit unemployment leading into 2010. "BOOyah!"
In those sometimes intertwined markets, a second half "doink" in treasuries (TLT) looked to play a hand in keeping those buy programs humming. No discernable news, other than the possibility traders appreciating new evidence for green shoots to sprout due to the jobs data was spied. However, with TLT dropping nearly 1.80% on the session to close at 95.13, "It is what it is." And for bulls, Friday's performance gives the appearance of investors' pulling back from this week's earlier flight-to-safety / rotation theme.
In corporate confessionals, a large void did offer growth stock traders and some savvy option strategists a nice opportunity in security software provider ArcSight (ARST). Shares broke out this morning from an eight-week long base following the company's better-than-expected results.
Last night ArcSight announced earnings of $0.09, beating views by a penny on a slightly better-than-expected sales jump of 24.9% from last year. For Q2 management reaffirmed its in-line profit range of $0.10 - $0.14, while pegging its revenues above consensus forecasts of $38.4M with an estimated range of $38.5 - $42.5M.
With shares allowing stock traders to purchase and profit from one of those sometimes elusive and / or aggravating "proper buy points", Friday's bulls did do quite well for themselves. Shares of ARST gained 11.75% and more than 5% above the 20.90 pivot to close at 21.97.
Likewise, early-to-the punch option traders using rich pre-report premiums to their advantage also did quite well. One such ratio spread involving a September 20 / 22.50 Call 1 x -2 was discussed on Tuesday at Investors.com for readers interested in some extra homework.
Earlier in the session and also easily "KAA-Ching-a-BULL", the described front-spread expanded from $0.35 to $1.40 for $1.05 in profit before handing back some of those gains. Ultimately, as shares of ARST motor towards the expiration sweet spot of 22.50 and with two weeks still remaining; the short contracts maintain a bit too much extrinsic premium before they mature into stock equivalents of some value or rip-ups.
Finally, with today's pre-holiday celebration the S&P500 (SPY) is testing its 50% retracement from last week's highs to this week's corrective lows. Additionally, the early August highs near 102 that were broken after much work and only to fail without much real headway-are being tested. The observation from this strategist is bulls that did buy the now confirmed latest pullback have reason to "schnitzel a little something" before it becomes a popular idea once more. For those remaining foot soldiers still at their desks and reading, enjoy the officially-sanctioned and now "three-day holiday."
Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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The information offered here is based upon Christopher Tyler's observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.
