Originaly posted by RCox.
Stock markets reversed sharply into the end of the week, as US employment data came in much lower than markets were expecting. March Non Farm Payrolls showed an increase of 88,000 new jobs for the month, which is less than half of the original market expectation. The Unemployment Rate saw a one tick decrease to 7.6% but traders were focused on the headline figure and the majority decision was to sell stocks at their already elevated levels. The result of 88,000 jobs was the lowest number in 9 months so the main question investors should be asking at this stage is whether or not this is a one-off anomaly or the beginning is a larger and more disconcerting trend.
Next week, we have a much lighter data calendar, so trading will likely be guided by any new sentiment driven headlines out of Europe (if there are any). One potential driver will be seen early in the week, as Fed Chairman Bernanke is scheduled to speak on Monday. We could see some response related to the weaker employment data and the general tone of any comments like this could be a short term driver of sentiment. Other than this, trading will likely be based mostly on technical analysis, as next week’s fundamental drivers are limited.
Last week’s CALL in the EUR/CHF barely finished in the money even though 1.2130 did turn out to be the dead bottom for the week. I will once again look to “draw from the well” at these levels as markets are giving another opportunity to get bullish. Upside potential continues to be massive for this pair and any signs of weakness should be viewed as a buying opportunity. We could see some downside momentum early in the week (hangover from Friday’s economic data), as the Euro is considered to be a risk currency and the CHF has some safe haven status. Because of this, I will be looking to buy weekly CALLS in the EUR/CHF on a spike down to 1.2110
For stock trades, I will be looking for weakness in non-defensive stocks and the situation in Oracle is starting to show potential for PUTS. The company’s last round of earnings data missed market estimates and led to stock downgrades. From a technical perspective, prices are finding Fib resistance at current levels, so I will be looking for weekly PUTS in ORCL at 32.10
, expecting general weakness in stocks next week.