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Payroll Data Is Out: Where Do We Go From Here?

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One man's risk-management game plan.

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Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

Yesterday, in real-time on the Buzz & Banter, we made a few observations:

"Hope isn't a viable investment vehicle, but in a perfect world, I would like to see a pop up to S&P (INDEXSP:.INX) 1630 or so, so I can re-initiate some downside risk through December SPY (NYSEARCS:SPY) puts and define my risk in kind (through the lens of the downward sloping trend channel that has been in place since May 22)."

And:

"The trickiest print (on payrolls) -- and perhaps the path of maximum frustration -- would be in line, and we would quickly hear three days of volatility getting sucked out of option premiums."

Fast-forward to this morning, moments after the economic data was released; we had 1) in-line non-farm payrolls (178K vs. est. 175K) and S&P Futures trading at 1630.

Be careful what you wish for, right?

With the dueling channels still in play -- with the modified, and some would say truer trend line in place below at S&P 1600, which was our downside target that held like a champ yesterday -- a lot of traders will defer to technical analysis today now that the big, bad catalyst is out of the way.

I will also note that as a function of the slope of the (shorter-duration) downtrend channel, S&P 1640 will provide a nice and tight defined risk for those looking to fade this initial move higher.

For my part, after trading around a short bias through September SPY puts, I flattened the remaining 25% yesterday into yesterday's dip to +/-1600 (after peeling out of the other 75% into Wednesday's melt).

While I have a few one-off long positions -- Facebook (NASDAQ:FB) for a trade, and another blue-chip smartphone maker-I entered today's session sans S&P exposure, for the first time in a long time, with an eye toward adding downside December paper in and around S&P 1630, per yesterday's vibe, with a tight stop above S&P 1640.

Should the bulls push through that level, they've got a clear shot, through a pure technical lens, toward S&P 1700.



I continue to feel that the bears have some unfinished business -- perhaps down to S&P 1500 -- and with a stair-step risk management approach, we can tier our position structure with advantageous risk reward such that we can trip, but not fall, if we're wrong.

Random Thoughts:
  • In terms of my defined risk in Facebook, the chart below speaks volumes. My trade trigger is rumbling that its "in-stream advertising" is driving substantial revenues. It's an anecdotal data point -- not gospel -- but you can try anything as long as you're disciplined.


  • Japan continues to make waves; check the chart below, which is the Nikkei (INDEXNIKKEI:NI225) vs. the S&P.


  • Pulling back the aperture a bit, look at the five-year chart of commodities vs. the S&P.


  • I'll be doing a Power Trading Radio segment tonight at 6:00 p.m. EDT, for those who can't get enough markets during the trading days!
R.P.

Twitter: @todd_harrison

Follow Todd and over 30 professional traders as they share their ideas in real-time with a FREE 14 day trial to Buzz & Banter.
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Position in FB and SPY.
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