Markets Continue Decline – Employment Report on Friday – Treasuries Rally

by Tom Nunamaker on August 31, 2010

E-mini S&P 500 1040.00 -5.00
EUR/USD 1.2674 +0.0008
30-Day Fed Funds 99.820 0.000
Gold 1236.0 -2.0

The market sold off yesterday and look to continue the downward decline today.  S&P futures are down 5.00 as I write this.  European markets sold off today around -1.0% to -1.25%.  The EURUSD gave up some ground as well yesterday (USD was stronger).  There isn’t any market moving economic news today.  ONN.tv said the Japanese stock market hit at 16-month low and the Yen is near a 15-year high versus the US Dollar.  Market participants are concerned with the economic recovery losing steam.  Where are investors going with their funds?  Treasuries!  10-year Treasury Notes are yielding 2.50% as the treasury rally continues.

The only two reports that could move the markets this week are Pending Home Sales on Thursday and the Employment Situation on Friday.  Econoday says the consensus nonfarm payrolls M/M change is -80,000 jobs (-160,000 to +75,000).

Here’s the ShadowStats.com Unemployment chart

ShadowStats - Unemployment Rate (U-3 & U-6) vs SGS Alternate

ShadowStats - Unemployment Rate (U-3 & U-6) vs SGS Alternate

So what’s an option trader to do?

The directional traders and traders I know using technical analysis are bearish for the most part.  I wouldn’t ignore this and have extra long puts in place.  This might be a good week for weekly option plays as there’s not much on the news front; however, price risk is big with weekly trades so protect the downside!

Picture of the Day

One of our students has a neighbor with a 500mm lense and a love of birds.  Roger Webster or San Martin, California gave us these two photos to publish.  Click on the images to get the full size!  Enjoy!

Hummingbird

Hummingbird

Hummingbird

Hummingbird

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