The Trading Day Ahead - 09/05/08

With the bloodletting on Wall Street yesterday, some market participants, will no doubt be taking a cautious stance and looking for the other shoe to drop. We do have an active slate for the day, on the economic calendar with Non-farm Payrolls, Unemployment rate, Hourly Earnings and Average Workweek all due to be reported today.

The bad news is; initial jobless claims numbers were reported yesterday and an unexpected rise in the number of people filing for unemployment for the first time, a rise of 15,000 from the prior week, was a major contributing factor to the big decline in stocks yesterday.

The good news is that all the economic news releases will be out at 8:30 AM, before the market opens, so traders get to plan their day after the fact.

But for the jobs numbers that will be reported today, we would look for stocks to rebound somewhat from the steep drop yesterday. So hopefully, its not its not all doom and gloom on the jobs front, even though we do expect another monthly decline, the eight consecutive one, in non-farm payrolls. Hopefully, Wall Street deems the numbers not negative enough to warrant another drop in stock prices.

If stocks open to the upside, we recommend traders buy call options on the S&P Deposit Receipts (SPY), more specifically, the September 124 calls. However, initiate the trade only if stocks look strong on the day, but before major moves, assuming we get any, and look to exit early. The symbol is (SPYIT) and the current price is $2.39. Enter at current prices up to $2.50 – stocks most likely won’t open at Thursday’s closing price and enter a price to sell after you place the trade, at 25% above where you entered.

Tags: Economic Calendar  S&P