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MORNING UPDATE: THE JOBS REPORT IS OUT – TIME TO TRADE OPTIONS

This morning, the Labor Department released its monthly update on U.S. jobs. The
general expectation was for slower job growth in April, with around 178,000 new
jobs.

What we got was much, much more; nonfarm payrolls rose by 253,000. Unemployment
is running at 3.4%, below predictions, and is tied for the lowest level since
1969.

The key focus, though, is wage growth: Is the Fed’s policy of raising interest
rates doing enough to cool off wage inflation? The numbers suggest… no. Average
hourly earnings rose 0.5% for the month, up 4.4% from 2022. (While all this is
happening, Sen. Bernie Sanders is now trying to more than double the minimum
wage from $7.25 to $17.00.) 

Regardless of the news, we are looking today for reversion trades on just about
every high-volume stock with options that we can get our hands on. On Fridays,
specifically, we want to trade the SPDR S&P 500 ETF (SPY) and the Invesco QQQ
Trust ETF (QQQ), which tracks the Nasdaq 100, alongside a host of stocks like
Ford Motor Co. (F) and Apple Inc. (AAPL). 

This chart shows how we’ll pick our shot…

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We are looking for stocks to “revert” off the second standard deviation band
that you see below. It happened yesterday at 10:30 AM, and 12 PM, allowing
traders to either trade the SPY, the leveraged Direxion Daily S&P 500 Bull 3X
Shares (SPXL), or options on the SPY that expired at the end of the day. This
strategy, which I’ll outline later today, can be a really great way to mix
risk-reward during  Friday trading sessions.

We are looking for stocks to “revert” off the second standard deviation band
that you see below. It happened yesterday at 10:30 AM, and 12 PM, allowing
traders to either trade the SPY, the leveraged Direxion Daily S&P 500 Bull 3X
Shares (SPXL), or options on the SPY that expired at the end of the day. This
strategy, which I’ll outline later today, can be a really great way to mix
risk-reward during Friday trading sessions.


HERE’S WHAT I’M WATCHING TODAY (MAY 5, 2023)

Contagion: There are plenty of people now dancing on the grave of PacWest
Bancorp (PACW), Western Alliance Bancorporation (WAL), and Bank of Hawaii Corp.
(BOH).

But we’ve reached a point where the insanity has translated into outright
danger. It’s important to stress that PacWest isn’t exactly a crypto-bank with
Barney Frank on the board of directors. It’s brick-and-mortar operation, with
quality loans with long-term relationships. If this spreads to a bank like
PacWest, it can spread anywhere. 

There are two major forces at play here that require examination immediately.
First, it’s the basic nature of fractional reserve banking. But second, it’s the
advantages that the TBTF banks have over everyone else. A bank like PacWest
takes deposits, puts money into safe Treasury bills, and, maybe, gets a 4.5%
yield on the one-month T-bill. That’s how long they’ll wait for money… 

But a TBTF bank like JPMorgan Chase & Co. (JPM) (which has close to sixty times
the assets of PacWest) can put every dollar with the Fed today and receive more
than a 5% yield, then get all that money back tomorrow morning. It’s completely
and totally insane.

Oil Rebounds: Yesterday, I taught people about the MicroSectors US Big Oil Index
3X Leveraged ETN (NRGU), which is a completely unsafe ETN, suitable only for
those tormented souls with chronic, crippling addictions to trading oil prices. 

NRGU aims to provide investors with returns that match triple-leveraged exposure
to the underlying performance of the Solactive MicroSectors U.S. Big Oil Index,
which tracks the top 10 oil-and-gas companies in the U.S.. But watch the
Relative Strength Index (RSI) and the Money Flow Index (MFI). In the case of
both the RSI and the MFI, the two indices are down at oversold levels that we
haven’t seen since July 2022, September 2022, and March 2023.  West Texas
Intermediate (WTI) crude prices are up 3% this morning after falling down into
this range. Just saying.

Politicking: It’s President Joe Biden against House Speaker Kevin McCarthy on
the debt ceiling. As the actual future of the dollar hangs in the balance, Biden
started calling McCarthy names and claiming the GOP would default on the debt.
As I explained in Midday Momentum yesterday, no one in Washington knows what
they are doing. And the explosion of the federal debt to $50 trillion – as
projected by the Congressional Budget Office – is catastrophic to your money.
Buy some gold, own oil stocks, and get out of zombie stocks. Your future is at
stake.



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TRENDING

 * D.C.’S POLITICAL THEATER WILL HAVE REAL CONSEQUENCES FOR YOUR MONEY

 * THE DEBT CEILING TRADE IS GONNA BE INSANE…

 * D.C. IS ABOUT TO DRIVE UNWARY INVESTORS OVER A CLIFF – HERE’S WHAT TO DO

 * I CALLED OIL’S REBOUND ON AIR YESTERDAY – HERE’S HOW TO TRADE IT

 * MORNING UPDATE: THE JOBS REPORT IS OUT – TIME TO TRADE OPTIONS

Published
May 05 2023
by gmadison
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