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ADP Jobs Report – Time to hedge

Ok, so this is it, right? Isn’t this the week that we are supposed to turn the corner? Isn’t this the week that we are going to see job growth as opposed to the incessant loss of paying positions? If todays ADP report is any indication, you might want to hedge those bullish positions just a bit.

JOBS

Image by Leader Nancy Pelosi via Flickr

While we have had a lot of data that suggests that the economy is in fact improving, todays ADP report came in showing a loss of 23,000 jobs for the month of March. Analysts were expecting GROWTH of 40,000 jobs. So, the concern is, with the most important economic report of the month scheduled for Friday, what direction and how significant a trend will tomorrows weekly State Unemployment Filings create? Bear in mind that the markets will be closed on Friday, so the emphasis of that report will be speculated on and driven in large part by tomorrows weekly numbers.

In some ways, if the Monthly Labor reports come in less than expected (and I think that they are a bit too optimistic), the markets will have three full days to digest the data without a strong sentimental reaction. I think back to the Dubai situation which seemed to be timed for the exact reason – release the bad news on a day when the markets are closed to minimize the shock reaction of the market.

This market seems ready to take a correction. Volume has been very light, the trend has become quite soft. Look at almost any chart and you’ll notice a “rounding off” of the price pattern over the past week to 10 days. of course, it could be consolidating and preparing to take another leg upwards, but if it were me, I’d be placing my bets on the other alternative – that the markets are simply looking for a reason to initiate some sort of near term correction.

So, if we continue to provide stimulus and better economic data, the investors are sure to come back in force… or are they?

Keep an eye for a downside move in the near future, and as always, stayed hedged!

Jeff McAllister

OptionsANIMAL Instructor

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