An Ignoble Experiment: Early Bird Catches the Worm

	Follow us:	Share this:

Early Bird Catches the Worm

Last Friday we received the latest non-Farm Payroll report from the BLS. It was slightly less than expected.

Market Consensus before announcement

Nonfarm payroll employment in April increased a somewhat improved 165,000 after rising a revised 138,000 in March. Market expectations were for a 153,000 gain for April. The net revisions for February and March were up 114,000. The unemployment rate slipped to 7.5 percent from 7.6 percent in March. Turning back to payroll data, private payrolls gained 176,000 after rising 154,000 in March. Wages improved after a lousy March. Average hourly earnings rose 0.2 percent, following no change in March. On the negative side, the average workweek edged down to 34.4 hours in April from 34.6 hours the month before.

Inside the report from the BLS we read the following.

Payrolls +175,000 - Establishment Survey
US Employment +319,000 - Household Survey
US Unemployment +101,000 - Household Survey
Involuntary Part-Time Work +26,000 - Household Survey
Voluntary Part-Time Work -12,000 - Household Survey
Baseline Unemployment Rate +0.1 - Household Survey
U-6 unemployment -0.1 to 13.8% - Household Survey
The Civilian Labor Force +420,000 - Household Survey
Not in Labor Force -231,000 - Household Survey
Participation Rate +0.1 at 63.4 - Household Survey

Early last week when a report was released, people in the mainstream media finally noticed – and more importantly reported – that the market made a strong move before the ISM report was released. Reuter’s admitted to sending out the information to special HFT clients.

That happened again when the NFP data was released.

62 milliseconds before the payroll data was released, the ES, gold, and bond markets made huge moves. Were they simply lucky bets, or yet another move based on inside information for the special people?

Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”

---Larry Levin

In conjunction with TheStreet.com and Bar Chart, Trading Advantage Chief Market Strategist Alan Knuckman provides a daily morning update on the global action in stock futures, gold, oil and interest rates.

Congratulations to William Schwab

Congratulaitons to our student of the day William Schwab. William was an extremely active participant in the options classroom on Friday and demonstrated a keen understanding of the volatility concepts taught by the education team. Each day in the classroom Scott, Steven, and Michael continue to delve deep into options strategies and construct innovative trade signals. Good job William!

NOTICE: Testimonials are believed to be true based on the representations of the persons providing the testimonials, but facts stated in testimonials have not been independently audited or verified. Nor has there been any attempt to determine whether any testimonials are representative of the experiences of all persons using the methods described herein or to compare the experiences of the persons giving the testimonials after the testimonials were given. The average reader should not necessarily expect the same or similar results. Past performance is not necessarily indicative of future results. No person was compensated for providing a testimonial.

OPTIONS: Volatility Commentary

---Steven Lee / Michael Shorr

The biggest news to hit the tape in years, the May NFP report was.....meh. Payrolls came in +175k versus an expectation of +170k. Last month's number was of course revised down from +165k to +149k. The unemployment rate ticked up 0.1% to 7.6%. What was curious is a disturbing trend. The majority of the new jobs created went to the oldest age bracket, those 55 and older. This demographic saw an increase of 203k jobs in May and the total of 31,488,000 is the highest total ever. Simply put, Americans are spending more time working and less time retiring. So, although we are seeing a nominal rise in employment (still not enough to make up for the losses since 2008), it would be very hard to argue that the quality of life is showing any improvement. German exports showed some "green shoots" as sales abroad gained 1.9% in the month of April. Their trade surplus did drop 13.7% and industrial orders fell 2.3% as domestic and foreign demand weakened.

Today I want to highlight one of the new tools that we now have at our disposal. Our options educator Steven Lee developed a proprietary metric that gives us another indicator to help us analyze the price patterns of a particular stock. It is called the Trade Range Indicator and has proven quite powerful in our beta testing. Today we put out a signal in LinkedIn (LNKD). We are past their earnings report so we can discount that event premium. There is no specific news out on LNKD yet we are seeing a backwardation pattern in the vol structure. The technicals are suggesting a consolidation pattern. The realized volatility is in a continued bear pattern. The new Trade Range Indicator is also suggesting that LNKD is setting up for a consolidation pattern as well. Given all of these factors, we wanted to construct a trade signal that would give us the best reward to risk ratio should this consolidation pattern come to fruition.

FOREX: Currency Spotlight	---Ed Moya

It appears traders will not touch an Aussie long position with a 10-foot pole. At least the recent round of weaker Chinese data points and growing arguments for a rate cut have kept significant pressure on the currency with the highest central bank rate. Price action on AUDUSD started the week by gapping down 90 pips. Downward pressure was strong against its other major partners except the Japanese yen. With growing speculation that the Federal Reserve may consider reducing the $85 billion-a-month bond buying program in September or at the very latest December, the inflated commodity currencies who welcome a pullback may see key weakness take price action to new lows. Tonight, the focus will fall heavily on Australian Business Confidence. Last month’s reading indicated conditions are worsening and fears are growing that the labor market is showing signs of weakness. Since growth is definitely slowing, all signs may point to an earlier cut than the expected November, if we continue to see stumbling readings in manufacturing and retail.

STOCKS: Watch List

---Charles Moon

We had a strong finish to the weak off slightly better then expected non-farm payroll numbers. The Dow finished up over 207 points and the S&P 500 finished up over 20 points. Now while I believe that the gains were fueled by a combo of profit taking, economic reports, and the rollover of the S&P Futures contract, I just find it interesting on how big of a reaction this has been off a major support range in the S&P 500. Now with both situations coupled together, we had a 45 point rejection higher off this support range. Look to the SPY and watch 2 specific price levels for support. Look for 159.75ish and 153.50ish for support as evidenced by the reaction the last few months. I believe if we break through these levels and can't recover to close ABOVE these numbers, it can be the the sign the correction has started. If these levels can hold, we should catch a nice bounce to the upside just like we have the last 2 days.

One of the more volatile sectors these days has been the Financial Sector. To try and play the volatility, just watch the correlation it has had with the S&P 500. As the SPX has gained, so has the recovery of this sector. When the sector got hit pretty hard, it was when the the markets had tanked. The 3 stocks that stick out the most here are Goldman Sachs(GS), Morgan Stanley(MS), and Prudential Financial(PRU). I have written a lot about them as of late, and with good reason as these stocks have been the most volatile. These 3 stocks have recovered and made strong moves higher to the tune of creating new 52 week highs. The danger here is also the possible reward. With volatility the opportunity is there to make a nice, quick profit. You are also at risk to take a fast and steep loss. If volatility is not your play, then it would be advisable to stay away from these stocks. I would look at Wells Fargo(WFC) and Bank of America(BAC) for the play. Again this entire sector is volatile at the moment, but if you can keep an eye on the S&P 500, then you should be able to navigate your way to a decent play. Open Position: INTC, ADBE Stocks to Watch: INTC AAPL GOOG IBM AMZN ADBE FB TSLA GRPN CTXS CSCO NTAP JBL BAC C PRU WFC GS JPM MS CMI CAT NFLX WDC GE AIG LULU LNKD DIS KORS COH FOSL CROX STZ NKE UA CHKP JNPR POT GMCR HOG YUM LOW HD LEN TOL V MA AXP DFS LVS MGM TSL FSLR JASO

FUTURES: Technical Data

ES 1641.00 / 1632.00

POC… 1637.50

YM 15222 / 15144

NQ 2986.00 / 2966.50

NOTES FROM THE PIT
Click Here To Read

COMMODITIES: Play of the Day	---Patrick Assalone

Gold fell around 2 percent on Friday, its biggest one-day drop in overthree weeks, as funds dumped bullion after resilient U.S. jobs datasuggested the Federal Reserve could begin to scale back its monetarystimulus later this year. It posted its first weekly drop in two weeksafter Friday's selloff more than erased gains earlier this week. Asharp dollar drop and strong physical demand had lifted gold above$1,400 an ounce for most of this week. For the week, bullion eased 0.3percent.

is a leading investment education firm that empowers traders to achieve and surpass their financial goals. More than 50,000 students have used Larry Levin's proven techniques for powerful results.

IMPORTANT NOTICE: Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. Nothing in our website shall be deemed a solicitation or an offer to Buy/Sell futures and/or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our site. Also, the past performance of any trading methodology is not necessarily indicative of future results. Trading Advantage LLC provides only training and educational information. By accessing any Trading Advantage content, you agree to be bound by the terms of service. Click here to review the terms of services.

DAYTRADING involves high risks and YOU can LOSE a lot of money. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those talked about in our site.