Friday's employment report is a binary event. That event has two opposing outcomes. A strong jobs report at 200,000 and over would raise the chances of a September rate hike significantly. That would probably tank the market. A jobs report at 150,000 or lower would probably cause the Fed to postpone the hike until December or later and the market would probably rally. A number in the middle would leave investors confused and the market would probably decline.
The binary outcome is that the market is likely to move in one direction at a rapid pace. That direction is unknown. We have a complicating factor tonight. The volume has spiked the last two days to 6.8 billion on Wednesday and 6.4 billion today compared to 4.9 billion on Monday. Both days the market made triple digit moves and finished well off the lows. However, we did make a lower low today.
That volume is a response to the sudden increase in selling. However, on both days the dip buyers showed up to absorb that selling and that is significant. Today the ISM manufacturing came in at an 8-month low. That prompted the surge in selling early in the day. It would appear that we are back to the "bad news is good news" market where bad news is bought.
We have the potential on Friday for either good or bad news in a report that nearly all the Fed heads have said will be crucial to their rate hike plans. Volume should be the lowest of the week. That means we could get a large triple digit move in either direction or even both directions. Since we are predominately long in the portfolio there is no reason to add new long positions. We already have two market oriented short positions as a hedge against those longs. There is no reason to add a new play when the market is likely to gap open significantly on the jobs news. We would probably get a bad fill regardless of the direction we chose.
NEW DIRECTIONAL CALL PLAYS
No New Bullish Plays
NEW DIRECTIONAL PUT PLAYS
No New Bearish Plays