Higher on Jobs

S&P500 daily at 1:17 EST

Intraday Update

MARKET BEHAVIOR
Stocks added to yesterday’s gains and continued bouncing off the 1,740 lows.  These gains pushed the market back into last week’s 1,770 to 1,790 consolidation.

MARKET SENTIMENT
The January Jobs Report came in 75k under expectations, but failed to trigger another leg lower since most of the traders who would have sold the news already bailed out earlier in the week.  When there is no one left to sell, it doesn’t matter what the news is.

We’ve risen an unthinkable 50-points over a couple of days despite many people’s expectation of a larger selloff.  But that is how the market works; convince everyone it is headed one way before snapping back the opposite direction.  This reaction only seems irrational if we focus on why people are buying disappointing employment.  But that is looking at it from the wrong angle.  People aren’t buying the news, they’re simply not selling it.  Often we oversimplify the market by assuming it moves because of buying and selling, but that’s only half the equation.  The other half is traders choosing not to buy or sell.  Over the last couple of weeks, nervous owners sold to more confident buyers willing to hold this volatility and risk.  These new buyers were unmoved by today’s disappointing employment and we bounced on the resulting tight supply when they chose not to sell the news.

TRADING OPPORTUNITIES
Expected Outcome:  Inside extended trading range, moving toward the upper end of the range
If the market wanted to sell off, it had the perfect excuse.  Missing jobs by 75k is a great reason to hit the sell button if that is what traders were inclined to do.  The fact they didn’t demonstrates current owners are not overly concerned by earlier Emerging Market issues and now a continued dip in domestic hiring.  Those lacking conviction sold over the last two weeks, leaving us with a far more calm and confident core group of owners.

Alternate Outcome:
Most of the buying over the last couple of days was driven by short covering.  While buying is buying, motivations matter because it gives us clues into the sustainability of a move.  If buyers of this rebound are bears and don’t believe in this market, that support will be short-lived.  This bounce will only continue if a wider group of buyers is willing to step in and support prices.  If not, then this is just a dead-cat bounce on the way lower.

Trading Plan:
When the market wants to go higher, we have to respect that.  We reclaimed prior support near 1,770 and overhead resistance remains at 1,800.  The market is likely entering a wide trading range as it consolidates 2013’s impressive gains.  Buying weakness and selling strength is likely the best strategy going forward.  After 1,800, the next level of technical resistance is the 50dma and 1,810.

AAPL daily at 1:18 EST

INDIVIDUAL STOCKS
Tim Cook announced AAPL just bought $14B in stock over the last two weeks.  While many think this is bullish, to the skeptic, that shows the company is propping up its stock with artificial demand.  If the only reason we are holding $500 is because AAPL is buying stock so aggressively, what happens when they stop?  Without this $14B  buy back, the stock likely would have fallen even further post-earnings.    Chances are the stock will eventually make its way to where the market thinks it should trade once this artificial demand dries up.  Tim Cook was promoted to CEO because of his operational talents, not his stock picking skills.  If he’s buying the dip, he’s likely early.

TSLA is continuing its rebound higher after succumbing to recent broad market weakness.  It is acting like it wants to break $200 in the near future.

Plan your trade; trade your plan