Jobs – Jobs. We Have Jobs Everywhere!
Since the bottom of the great recession in 2009-2010 the United States has added jobs at a rate that has been unprecedented in the past 50 years. On Friday the labor department released its May numbers and the street loved them. The jobless rate in May reached its lowest rate of the year 3.8% and that is the lowest rate since 1969.
The U.S. added over 230,000 new jobs in the month of May and it continued its winning streak to 92 months, a high since the labor department began keeping records. Another bonus was that the average wage was up over 2.7% from a year ago. This number makes it nice for the rank and file who are seeing their incomes rise at a faster rate than management. The gains have extended to all corners of the market as women found their unemployment rate at 3.6%, the lowest ever.
As could be expected the highest average wage is in the information and technology sector with a worker bringing home almost $40 and hour. But all sectors of the economy are advancing with the financial sector not far below at nearly $35 an hour. Also participating in the rally are manufacturing jobs that have been lost by the millions in the past 30 years. Over 12.7 million jobs have been added to this sector since the beginning of 2010.
One of the bright spots is that minority groups that have suffered the worst when jobs have disappeared are now getting hired. They are not in the highest paying group, but they have added 16.7 million new hires since 2010 and the average rate of compensation has risen to just under $16 an hour.
The markets liked the numbers as the Nasdaq rallied to just shy of its all-time highs and the Russell 2000 set another new record. The DJIA and S&P 500 continue to rally but have yet to reach all-time highs. This last jobs report sets up and interesting scenario. In the wacky view of Wall Street, too much good news is generally considered to be bearish as it is only a matter of time until the feeding frenzy stops. It will be interesting to see if this report remains a bullish indicator for the next month or the street thinks the top is in.
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.
Question: Why not sell the Weekly Straddle for a larger credit than a vertical spread?
Selling a straddle for a credit is not the same as selling a credit spread. When you sell a straddle, you are selling two options at the same strike price a put and a call. And while it does create a much larger credit it also creates unlimited risk. Selling a credit spread doesn’t have as much profit potential as selling a straddle, but it has limited risk. Remember when you sell an option you create unlimited risk. To negate that risk you must buy an option against your sale. I have seen some of the most brilliant people on earth blow billions of dollars by taking unlimited risk. Don’t be one of them. Stick with the spreads that have limited or unlimited reward but always have limited risk!
The Wise Guy Report: The View From The Electronic 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. Let’s take look at last’s week price action in Crude Oil.
Crude Oil Finally Hits A Speed Bump (Trending)
After a year long rally it was only a matter of time until Crude Oil finally hit a speed bump. As usual, when a market makes a high or low it doesn’t announce that it is going to turn around. It just happens. Many times, the reversal will come on market expectation where the news is great, but the rally ends because the street was figuring that the news would be even better. I don’t think the pause in this rally should come as a surprise. The Rig count in the U.S. has been going higher each week and that means we are pumping more Crude. In fact, if you look back two years ago Saudi Arabia was pumping out 8 million barrels of oil a day and the U.S. was only producing 6 million. Fracking is a more expensive way to produce oil and so many of the participants could no longer turn a profit and left the market. However, this week the U.S. has overtaken the Saudis and is pumping our over 10.5 million barrels a day. The price of crude is down almost 9% in the past 10 days and it is trading at long term support. If this price doesn’t hold, we may see some panic selling and a possible near term blow off. On the other hand, if you are still bullish, this may be an excellent spot to start to either add to a position that has a profit in it or take a risk and enter the market from the long side hoping the retracement is over.
Getting short this market down here is a scary proposition and I would want to see a couple of lower highs and lower lows before I would get involved from the short side.
This week we will take a look at last’s week price action in ???????????????????.
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