The jobs numbers at 113,000 were disappointing but overall they were actually more mediocre. They are better than December but are beginning to indicate that the economy is trending sideways and not gaining more steam. A lot of this could be weather related but I cannot imagine this many people for two months now being away from their jobs due to inclement weather.
Overall this mediocrity seems to fit in well with the outlook at present. While most analysts seem of the opinion that the weather “may” have a slight effect, they think overall it probably has not. The unemployment rate moved down to 6.6 percent which I believe will be enough for the Fed to continue the tapering plans but shows that participation rate is incredibly bad.
Momentum To The Upside
My outlook last night in my market direction comments was for the market direction to have enough momentum to stay to the upside if the numbers were mediocre. I think that still is the case but it will not take much for the market to lose that momentum. Right now on the S&P, Dow and NASDAQ the momentum is still negative but rising. The Dow managed to get back above the 200 day moving average but may have trouble getting over the 100 day.
In the daily chart below you can see that yesterday’s push over the 200 day and the close were decent and have switched a lot of the momentum in the market to the upside however if the Dow has trouble with the 100 day we could see a sideways action develop. This will be negative for stocks. What I will be doing then is watching the 50 day. If it turns lower it will most likely work toward the 100 day. If that happens a new leg down will develop for stocks.
The S&P and NASDAQ cannot continue higher without the Dow eventually joining in and the Dow was hit the hardest of the three indexes in the latest downturn. If the Dow closes up just 15 points or flat or slightly down, Monday could see a start with a bounce up and then I would expect selling. Any kind of negative close on the Dow today or Monday will shake confidence among investors and the fear factor will enter again.
Market Direction Portfolio Trades
In my market direction portfolio this morning I moved in too early and took a loss. I then bought back in and used tight stops to recover the loss and end with a small gain. Overall though I had expected that the numbers at 113,000 would have been enough to keep momentum pushing stocks up. FullyInformed Members can review the 2014 trades in the Market Direction Portfolio through this link.
Morning Outlook For Stocks
Overall the market rally should be able to continue on these mediocre jobs numbers simply based on the quickly rising level of momentum and the steep oversold condition the market was in just a couple of days ago.
The problem with momentum will be the strength which while good yesterday would really need another day easily as good as yesterday to keep momentum pushing and turning positive. The outlook right now is for stocks to try to push higher this morning and possibly into mid-afternoon but I will not be surprised to see some selling into the close.
Overall the Dow needs a decent day again today to continue to rebuild investor confidence and appetite to risk their capital further in this market. A very soft close will impact investor confidence. At the time of writing this market direction morning outlook, the Dow has not turned negative but did pull back dramatically after an initial rise at the outset. It is now trying to climb back and is back up about 54 points. I would expect it to try to push higher but if it has another similar pull back in the afternoon, we most likely will see a very soft close.
I am not anticipating a soft close and do believe the job numbers while disappointing, are still enough to keep investors in this market. I am looking for a close on the Dow of at least 45 points and on the S&P a close at or above 1780 is very important.
Covered Calls
I have not removed any of the covered calls I put in place recently on my longer-term positions as I want to see today’s close as Monday’s close before determining that stocks are going to try to recover further.
Naked Puts
I am continuing to look for more opportunities for put selling against the big cap stocks I follow. My last trade yesterday was on Exxon Stock and I should have it up shortly.
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