MomentumOptionsTrading.com Midday Update for 9/5/2013
10-Year Notes Pushing 3%
We mentioned coming into the week the bulls had a good chance of rebounding following the August slide if support levels held. After a volatile Tuesday, the dip was bought and the push to resistance is carrying through again today. Although the gains are minimal, the S&P 500 Volatility Index ($VIX, 15.70, down 0.18) is dropping and has remained in the 15’s but the rise in the 10-year Treasury yield is offsetting further gains as Wall Street watches the 3% level.
This morning’s ADP Jobs Report came in slightly below expectations of 185,000 jobs added as 176,000 were created in August. Weekly Jobless Claims offset some of the miss as the number of people applying for unemployment benefits dropped by 9,000 to 314,000. The biggest surprise, however, was the ISM Survey number which came in at 58.6%, up from 56% in July.
The mostly positive economic news has pushed the 10-year note up 6 basis points higher to 2.963%, their highest level since July 2011. The concern here is that once 3% triggers the bids in stocks will start to dry up.
We have also talked about a continued rally into next week as Tech has been leading the way higher. There will be a lot of continuing news surrounding the sector into next week as Apple (AAPL, $495.07, down $3.62) is expected to announce some new products. Samsung and Qualcomm (QCOM, $67.82, up $0.54) have released “smart” watches this week and while Apple will likely wait another 6-12 months to enter the market, they could have something up their sleeve next week.
We are expecting a continued tight range into the close and ahead of tomorrow’s Nonfarm Payrolls report. While we don’t expect a huge move in the market on the news, we are expecting higher highs to continue into next week. There could be a fade in the back half of next week as the indexes reach the second levels of resistance that could lead to a retest of the August lows, or worse.
We just don’t think the indexes will hit new highs with all of the political rhetoric upcoming. October earnings will also follow September’s headlines and will be the major catalyst that could shake the indexes out of their 3-month trading range.
We have started setting up our next batch of trades as we have a few more September options still in play but we need to be careful with our trades because no clear trend has developed. Don’t worry, it will, just be patient.
As we head to press, the Dow is up a 16 points to 14,947 while the S&P 500 is higher by 3 points to 1,656. The Nasdaq is jumping 10 points to 3,659 while the Russell 2000 is advancing 3 points to 1,028.
Subscribers, check the Members Area for the updates.