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Short Squeeze\?

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With equity futures higher and Treasury bonds showing considerable weakness, will Friday trading session squeeze shorts higher following Intel and the non-farm report?

Payrolls rose while Unemployment rate falls

The Labor Department reported that August payrolls rose 39K, slightly above the +30K consensus. Furthermore, the July payroll figure was revised upwards to +67K from +6K. Looking at the unemployment rate, a fall to 5.7% versus the 5.9% July release should also bode well for equity investors.

Shares of Intel Significantly higher

After closing at 15.11 and setting a five-year low, shares of INTC appear to be trading at 16.28 in pre-market trading and most likely will buoy both the Dow and Nasdaq during trading on Friday. Further resistance can be seen at 16.50 and 17. If shares lose momentum and profit taking sets in, support is felt at 15.85 and 15.27.

Treasuries under pressure

The December 30-year bond is currently lower by 20 ticks (20/32), while the five-year note is off by 7.5. This move is not extremely significant; however, once the Dec bond loses more than one point (32/32) there will most likely be an asset allocation acceleration out of Treasuries (especially five year notes) and into more riskier assets, stocks.

Futures

According to HL Camp and Company, fairvalue for the S&P 500 today is $.16. That price will not change during the day. Program buying is set at $1.52, while program selling should be triggered at $--1.42. FairValue for the NDX 100 today is $1.18. The September S&P futures are currently higher by 8.30 at 891.50, while the Nasdaq futures are up by 15.50. Turning to the Dow, indications via September futures are for an initial move higher by 27 points (contract at 8340).

PIMPCO's Bill Gross on Stocks

This well-known bond fund manager is extremely negative on stocks, arguing that the Dow belongs at 5,000 and the S&P Index at 650. Mr. Gross is quoted as saying "Earnings have been phonied up for years and the market still sells at high multiples on phony earnings. . .We already "know" bonds are going to yield/return 5 percent or so over the next umptyump years. How about asking the same question for stocks? Afraid of the answer?"

John Seckinger
Option Investor


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