The Job Boom Continues Unabetted
he May jobs number set all kind of records, some of which were over fifty years old, but when the July number was released on Friday more new records were set. Not only is the economy strong (in the Feds opinion maybe too strong), it appears to be getting stronger. Although the absolute number of new jobs rose by an estimated 213,000, the winning streak of 93 months of more jobs continues.
Unemployment actual rose to 4.0 % from 3.8% but that was because that the strong demand has brought many workers that had simply left the market years ago back into the market and they have been counted as part of the unemployment. Overall the economy has added 250,000 jobs on average to the market each month in 2018. In the all-important age group of 25-54 those wanting to enter the job market rose to 85%, a very healthy number.
One of the chief groups to find improvement in the current market is the Hispanic sector. Their jobless rate fell to the lowest on record 4.6%. June also saw improvement in the participation of the other minorities such as women and black workers who saw their piece of the pie grow as well as the other groups. White males continue to lead the employment market with less than 3% being unemployed.
So, while the average worker is doing as good as ever it brings one question into the equation. What will the Fed think? The QE policy put in place during the great recession has benefited many and as the Fed starts to unwind and raise interest rates the question is where does the rate start to slow down GNP growth?
Well apparently inflation is under control so the news released this week should keep the hawks at bay. Many of the hawks are still fearful that the employment figures aren’t as rosy as reported and they worry that there is a large group of workers that have never come back to the job market. If you add them into the pool, employment still has a way to go and inflation is just around the corner. My guess is that the Fed, who has raised rates twice this year and promised two more bumps, will not raise at the August or September meeting and will wait to see how the employment numbers work out. No one wants to be remembered as the group that took the accelerator off the floor board and caused the next recession!
Ask Mr. Seifert
I am constantly asked questions about trading and how to exploit certain market factors to insure success. Each week I will answer one of those questions here with a short paragraph.
Why do I lose money when I buy cheap puts and calls despite the fact that I’m right on my market direction call?
I am asked this question all the time. You are sure that Goldman Sachs is going to report great earnings and revenues and you feel that the stock is going to rally. You decide that the best leverage is to buy out of the money calls that you think are cheap (only $0.50) and if you are correct you will at least double your money. Right? – Wrong!
First, there are no cheap out of the money puts and calls. They are priced off the current At The Money (ATM) straddle and all market participants are aware of their value. Remember, that for every option trade there must be a buyer and a seller. So, when you buy that .20 delta cheap call you must be right in two ways. The price must go in your direction and it must be greater than the premium you paid for option.
The earnings number comes out and you were right. GS rallies $15 but your $0.50 call actually goes down in value! You are shocked and blame everyone but yourself. Here is what you need to do. First learn how the option model works. Second, use strategies that will protect you when your price direction is correct but the option loses value. I can assure you the correct strategy is not to buy cheap calls. Stop playing a game that you can’t win and learn how to use options to enhance your returns. Nothing in trading or investing is more frustrating than being right in the market only to lose your money.
The Wise Guy Report: The View From The Floor
Each week I talk about how the Wise Guys (floor traders) find the soft spots in the market and take advantage of price dislocation in three major commodity markets: Gold (GC), Crude Oil (CL) and Long-Term Interest Rates (ZB). On the equity side, I cover the MSS which is the Mister Seifert Sez Composite Index. This is a proprietary index that I created which measures the dollar flow of the four major indexes (S&P 500, Nasdaq 100, Russell 2000 and the Dow Jones Industrials) on an unweighted basis. This week let’s take a look at last’s week price action in gold.
Gold Takes Out Double Bottom (Downtrend)
Gold suffered another bad week as it continued to move lower taking out a big double bottom at 1250. From a technical view, unless you want to try one more week from the buy side, it is probably best to go with the downtrend. From the fundamental side, analysts seem to think that the big gold buyers in India and China are not using gold as a safe haven when things are tense in the world. In addition, the rise of U. S. interest rates and the dollar have been given as reasons that the shiny metal keeps falling out of bed. It would seem that investors who dollar average gold would be anxious to add to their position but as of now that is not happening. This week should be a key as to where the next move in gold will be. We could see a blow off bottom or the downtrend could continue. It important to watch the speed that gold is declining to decide if it is continuing its downtrend or it is about to blow off.
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The option trades and strategies offered by The Optionomics Group are very unique in that they all have limited risk while creating great leverage. Our basic BL – BR Credit Spread Strategy (and all of the others) let you control 100 shares of a $200 stock ($200*100 = $20,000) for only $500 (the spread differential) or 40:1 leverage with your risk limited to only $500. Plus our strategies produce winning transactions in four out of five possible outcomes.
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I offer a FREE Two-Week trial to the various subscription services with no cost or strings attached. Each strategy is explained in a 5-7 page booklet which includes sample recommendations and model portfolios. I doubt that you have ever seen anything like this. During your FREE trial, you can paper trade the various strategies and get a feel for the deal without risking a penny. Simply click on the appropriate tab on the Optionomics’ Home page to access the informative booklets and then sign up for one or all of the weekly subscriptions.
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Each Monday morning by 11:00 EST, the plays for the upcoming week plus updated model portfolios for each strategy are posted on the site. The prices in the reports are Monday morning’s opening prices. In addition, I have a webinar on Thursday afternoon where I discuss various option strategies, what is happening on the floor and answer any questions that you may have. Don’t worry if you miss the show. They are archived on the site. Sound Good? Good! You can subscribe to one or more of the subscriptions for only $19.95 each per month on a month to month basis with no contract or strings attached. If you subscribe to three, it is only $49.95 per month while you can subscribe to all six for only $79.95 per month, a 33% discount. I think you will agree that this is a super offer so give it a try. Click on www.optionomicsgroup.com to access the Optionomics Group web site and get started today doing what the pros do –
“Don’t Buy Them – Sell Them”.
Mr. Seifert