Is this a joke? Not to the 9.1% of Americans who are unemployed . Today’s unemployment report showed that the economy added the fewest jobs in 8 months, adding concerns to the state of the U.S. recovery. More concerning than the poor number of only 54,000 jobs added itself, is the huge drop off from April when there were 240,000 jobs added. This is a staggering drop of 77.5% on a month over month basis and is yet another sign the recovery is losing momentum, and at a sympathetic pace.
With today’s horrendous report, the markets sold off right out of the gate and have spent the better part of the morning trying to recoup some of those losses. While they have been somewhat successful (the markets are up about .2% off the lows), we believe the damage has been done. The technical back drop continues to deteriorate along with continually weak fundamental data. The only hope the market has in our opinion (other than maybe a surprise visit from Obi-Wan Kenobi) is if the SP500 is able to hold 1,294. If it is unable too, and our bias is that it will not be able to, we think the index will trade down to 1,250 and possibly even lower.
When the market starts to pullback like this, we recommend traders use caution. A strategy we like to implement is evaluating our portfolio and looking to see which stocks our holding up well the last few days. Most people tend to think you should buy things that are “cheap,” we here at stockhaven prefer to buy things that are “strong.” If looking to take advantage of expected downside, look into trading in the money weekly put options on the index ETF’s : SPY, IWM, DIA, & QQQ. Please note, these options are extremely volatile and not for the inexperienced.
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