To find out where the next explosive options
trading moves may be
hiding let’s take a good look at…
WHICH WAY
THIS MARKET IS HEADED
On Friday the markets had every reason to swoon to
the downside—right before the open the Labor Department
reported the steepest monthly job losses in
five years as well as a spike in the unemployment rate for March.
Nonfarm payrolls fell by an estimated 80,000 in March as opposed to the
60,000 expected, while the unemployment rate jumped to 5.1%. In addition
with this latest report job losses so far this year have totaled
232,000, an average of 77,000 lost jobs per month---and the market—WENT
UP!
As
you can see from the cashflowheaven charts above the SP-500 rose 1.09 Friday while the Nasdaq lifted by 7.68—up a total gain of 4.9% from last Friday---not
exactly the implosion a bad employment report would have caused just a
month ago. This amazingly options trading bullish reaction to some pretty severe
economic news should tell us all we need to know about this
market—sentiment has changed.
The move higher for the
week even came on decent volume—a key indicator of sentiment. Volume at
the New York Stock Exchange topped 3.6 billion shares Friday, while
nearly 2 billion shares changed hands on the Nasdaq. Advancing stocks
and options trading outpaced decliners by nearly 9 to 7 on the NYSE and edged just ahead on
the Nasdaq.
It's been absolutely
amazing—and somewhat counter intuitive--how this market has been able to
absorb bad news since the Bear Stearns debacle. It appears everyone
believes we're toward the end of the big subprime write-downs. In
addition to the Bear Stearns bail out news quickly followed of official
policy support for mortgage giants FNMA and FDMC proving the government
is willing to do ‘whatever it takes’ to shore up the financial sector.
This official stance may not be beneficial in the long term but traders
seem to have taken great comfort in it for the short term—and the charts
show it.
With light economic
reports this coming week and the full blown earnings season not
beginning until the week of the 144th all cashflowheaven eyes are now turning
to the Fed. Minutes from the Federal Open Market Committee's March 18
meeting will come out Tuesday--a speech Wednesday by FOMC voting member
Richard Fisher--and a Thursday speech by Fed Chairman Ben Bernanke, will
all provide more insight into how central bankers are viewing a retreat
in job growth and manufacturing and flat consumer spending.
Fisher, the president of
the Federal Reserve Bank of Dallas and a voting member on the FOMC, was
one of two policymakers that voted against the March 18 decision to cut
rates by three-quarters of a point. He wanted lighter action. Once the
FOMC minutes come out it will be interesting to see the degree of
divergence among committee members—for this rally to continue the
markets have to remain convinced that the Fed will remain
‘accommodative’.
In that sense Friday’s
disastrous employment results were a market positive. After the Labor
Dept. report Friday, the options trading and futures market bid up the chances the FOMC will
decide to cut rates by a half percentage point when it meets in late
April. Traders of fed funds futures contracts are already fully pricing
in a quarter-point cut, which would bring the target rate to 2% by the
end of this month. As long as those hopes stay alive the markets will
likely continue to rise—the question is…
HOW DO WE
MAKE MONEY ON IT??
We’re already fairly
well represented on the options trading bearish side with our current plays—what we need
now are some great bullish positions—and we’ve found them in spades!
The first cashflowheaven play is on a
technology company everyone loves to love—and the stock’s chart shows
it. Since the beginning of March this has been one of the most
consistent uptrends you’ll find in the stock market and we just
uncovered two powerful reasons for the stock to keep right on flying.
With the stock poised to keep on going we’re hopping aboard this
escalator with some well placed calls first thing Monday for what looks
to be a very profitable ride!
Cashflowheaven's next play takes
advantage of both the super growth in a certain specific emerging market
overseas and the continuing weakness of the US dollar. We’ve found a
growth story that will knock your socks off in its rate of growth and
its scale—this company currently has more paying customers than the
entire US population!
In addition the chart
just turned to the upside recently and broke critical resistance
Thursday for what looks to be a super profitable upside breakout—an
upside ride we’ll be jumping aboard this coming week with some strategic
new calls!
We’ve got a market ready
to move and two super looking plays to take advantage of it—so let’s get
going… options trading
For more information on everything you receive with your Pearly Gates subscription click on
Cashflow Heaven.