Today's Jobs Report in Retrospect: the Bears Win! The Bears Win!!

     My theory of the market reaction today worked out pretty darn well I should say. 

     http://diaryofarepublicanhater.blogspot.com/2014/04/in-this-mornings-job-report-big-enemy.html

     I had argued that the jobs number should be better than we saw during the first few montsh this year but the question was how much. The expectation coming in to this morning was about 200,000 jobs created, however, as we saw many on the Street expected considerably more than 200,000 and the real consesnsu was that it wasn't enough to meat the 200,000 mark but beat it by a significant amount. This did not happen as the number was actually 'only' 192,000. 

     Sure enough, the market tanked on the news, with the tech heavy Nasdaq getting especially hard hit with a 2.56% drop-compared with a 1.25% drop in the S&P and a .96% drop in the Dow. So does this mean the end for the tech which has been on such a huge run?

    "But the selloff in the frothiest names in the stock market that caused a 2.6 percent decline in the Nasdaq on Friday alone is what investors will be watching. That was the worst day for the Nasdaq since November, 2011."

    "It's a little bit of a warning, but I'm taking it as a late-cycle signal, which would suggest large caps doing a little better than small caps, high-volatility stocks lagging relative to low-volatility stocks," said Andrew Burkly, Oppenheimer Asset Management's head of institutional portfolio strategy. 

    "All these later-cycle characteristics are creeping into the market. It doesn't mean the end is here. It is just later in the market cycle," he said. "Overall, I'm still pretty constructive. There was a half-hearted breakout in the S&P this week (to new highs). We moved above 1,880 without any real big thrust or catalyst." He expects the S&P 500 to trade in a range between 1,840 and 1,880. 

     http://www.cnbc.com/id/101556540

     Some believe this isn't the end of the downside. 

     Who knows what pricked these balloons," said Steve Massocca of Wedbush Securities. He said the overfull IPO pipeline, with high valuations, insider selling in stocks and lofty valuations were all warning signs that the momentum names were setting up for a fall.

     "These downdrafts do create changes in sentiment, and these changes in sentiment become broad-based but the broader market will reach proper valuation sooner. It's not that far off," he said. Massocca expects the momentum stocks to bounce back, but he said that probably will not be the last of it and they would probably fall again, possibly harder."

      However, some see this as short lived:

     "James Paulsen, chief investment strategist at Wells Capital Management, said he thinks the market will stabilize and resume its march to new highs next week. "When it broke the upward tilt in the S&P, most of the S&P held together except for tech," Paulsen said. "My feeling is next week we get some buyers looking at these values that were created by the selloff ... I think it's going to bring in some buyers next week, and we're going to focus on the fact that the economic momentum is still here."

     So how did my own market strategy work out? I had bought up 100 shares of both CBSO and KING-these are the stock symbols-bought 40 puts in Citi when it was trading over $47 for the $44.50 May 5 target with 40 Bank of American calls at $18 for May 5. 

     http://diaryofarepublicanhater.blogspot.com/2014/04/some-thoughts-on-tomorrows-job-numbers.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29

     Jim Cramer last week had said that a good number mean buy BAC but a bad number means buy CBSO-CBS' spin-off for outdoor gear. 

     http://diaryofarepublicanhater.blogspot.com/2014/03/jim-cramer-buy-bank-of-america-if-we.html

      So part of my approach was a kind of Jim Cramer hedge-I bought both his bullish stock where the number is strong-BAC-and his stock for if the number is weak-CBSO. The number was weak and BAC sold off so my $18 calls took a beating. However, in a day when everything was hit, CBSO basically broke even-down just a penny for the day in fact. 

     So his prediction doesn't look too bad. What about my strategy? The jury is still out. I might have been better off waiting for today but of course I couldn't wait. Still the C puts position looks pretty good as C dipped beneath $47 briefly-the first time it's done that since this recent drop following the Fed's ruling that they couldn't raise their dividends. King was down a little but it was up over $20 at the start of the day. So anything can still happen. Right now I feel most confident in my short C position. Of course KING and CBSO aren't too bad as I just own stocks rather than options so it's not too risky. 

     As for BAC there's still time-a lot actually, they expire May 2. Even now, if I have to bet I think they will probably get back over $17 pretty quickly. I base this more on the technical performance of this stock over basically the last 5 years. BAC always nests at a number and stays there awhile. Right now they're at $17. It's not a shock that the market will want to see just how much support there is at $17. The test will be whether it gets back over $17 next week. Again, based on everything I've seen from this stock it will. 

    Then again, even if it doesn't this is probably only short term as it may decide that there must be anohter fight to the death between the bulls and the bears at this level. It's possible. What I don't see as likely is the stock going back to $13. BAC never does this or at least never during this long bull market-going back to the bottom in early March 2009-kind of a fateful moment for me, as just when it bottomed was when I lost everything in the market. 

   P.S. If you wounder what I mean by BAC's technical performance, take a look at the way this stock has behaved recently.

   http://finance.yahoo.com/q/hp?s=BAC+Historical+Prices

    Between March 5 and April 3 it finished the day under $17 exactly once-in 21 days. On March 14 it closed at $16,80. I'm not counting March 28 where they finished at $16.98. 

    However, from Jan 2 to March 5 the stock finsihed with a $16 dollar handle every day-not once did it finish beneath $16. It goes much further and further-this has been this stock's tendency. It picks a handle and then there's a long incubation period until it gets a new one. Before Jan 2, the stock was at $15 and closed there every day between November 19 and December 31. If you want check the chart-it keeps going, before that it was at $14. 

    Note that the 'incubation periods'-the long periods at one handle, is usally not that long- it was at $15 from November 19 to December 31, at $16 from January 2 to March 4 and then $17 between March 5 and April 3, and now... Now?

     It fnished under $17 again after just once in the prevous 21 days. What's also interesting is taht it's close today-$16,72 is the same as the close the last day in the $16 dollar incubation period-on March 4 it also finished at $16.72. So is today the end of the $17 incubation period-(Ip)? I'm betting not-literally. If it were to saty at $16 it would be the first time it failed to hold onto its new Ip in a long time. I don't think the news about BAC is too bad-it's actually got some good news with being allowed to raise its dividend unlike Citi.