After another volatile week, investors appear to be more convinced the Fed will move forward with a rate hike in September.
The release of the Non-Farms payroll indicated that the U.S. created a modest 173,000 new jobs in August to mark the smallest gain in five months, but the unemployment rate fell to 5.1% from 5.3%, the lowest since April 2008
The employment report began a downbeat day for the market as investors seemed to read the data as signaling that the Fed may soon decide to end its "ultra-loose" monetary policy in two weeks when they meet.
The selloff on Friday capped another brutal week for the main indexes, which suffered their second-largest weekly losses this year.
I didn't feel it was "safe" yet to enter into a new weekly SPX Iron Condor Friday before the long weekend, so are holding cash as our position until things settle down. You can't win by being on the sidelines, but you can't lose also. In addition to the uncertainty over how investors will react after returning from the Holiday weekend and summer in general, there is potential news being released Tuesday in China (during the overnight hours Monday in the US).
The SPX chart below gives a visual of the roller-coaster ride:
SPX 6 month chart
SPX closed down almost 30 points Friday at 29.91, down 1.5% from the previous day. The benchmark index posted a weekly loss of 3.4%.
VIX 6 month chart
The "fear index", or VIX, jumped Friday to close at 27.80, up 8.5%. This resulted in a gain of 6.7% for the week, above the historical average of 20.
We will continue to trade the plan and keep tight reigns on our risk management. Patience is a virtue that must be practiced in this market, sometimes it is better to walk away from the computer to remove temptation to enter a weekly trade. Please don't hesitate to email me anytime with questions you may have.
A recap of next week's economic news is below:
Markets closed for U.S. Labor Day Holiday
China Trade Balance (no time listed, but likely to be in overnight hours Monday)
8:30 am Jobless Claims
8:30 am Import & Export Prices
11:00 am EIA Petroleum Status Report
8:30 am Producer Price Index
10:00 am Consumer Sentiment
New Trade Entry:
Next week is the planned entry for the SPY Iron Condor for the October monthly cycle. Tuesday will be 38 days to expiration; so we may venture into entering the position sometime next depending on market conditions and available credit. With the volatility at these lofty levels, we may be able to go wider (sell a lower delta) for the same average credit. I also recommend that those trading the SPY Iron Condor consider reducing position size until we see the market return to some sense of "normalcy".
For those unfamiliar with the trade, the guidelines for all the Couch Potato Trader plays were most recently published August 20, 2015, and can be found here: Link to Articles
Trade updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,