We were expecting the Dow to trade pretty close to 10,000 going into Thursday’s close as we said it would be the level the bulls and bears do battle at. The Dow added over 200 points to close at 10,005 yesterday after a better-than-expected jobless claims report and the earnings beat from Cisco Systems (CSCO, $23.93). It may have been a great day for the bulls but it appears it will be short lived.
We have been saying all week that Friday could be a big day for the market and that we expected the volatility to remain high. The bulls have a 3-to-1 lead this week but it looks like the bears are going to win today’s session.
Drum roll, please…
Wall Street was expecting the unemployment rate to come at 9.9% with a loss of 175,000 jobs. We got the news at 8:30am this morning and it wasn’t good. The report showed employers slashed 190,000 jobs in October, driving the unemployment rate to 10.2%, the highest since 1983.
Dow futures were flat going into the report and are now down 52 to 9,902 and instantly turned negative once the numbers were released.
We were expecting the worse and we reduced our exposure yesterday by closing a few trades ahead of the news. We saw no reason to risk the 30% gains we had in Imax (IMAX, $10.89) or the 38% return we had in Barrick Gold (ABX, $40.71). We also closed a profitable put option position in Apollo Group (APOL, $56.47) for a 50% return.
Now that the news is out it’s time to go shopping. We did profile a new option trade yesterday and it could get off to a good start with the negative sentiment this morning. There are a few other trades we are looking but we want to see how the market opens and how some of these stocks we are following react.
We will keep you updated on our thoughts and if we see a trade we will be back at 1pm with the details. Current Subscribers can check the Members Area for the trade updates.