Vikram at MTS asked if I could gear this piece towards Friday’s jobs number – so let’s look at a few things.
In the bond market [Chicago Options:^TYX], 132.18 will need to be watched; the market likes that price so we’ll need to see who (bulls or bears) controls it. Should the bears take it, they will test 131.12.
A failure there targets 128.06. If the bulls win, their next order of business is to take out 135.07 – which allows a test of 137.10.
In the E-mini S&P [SNP:^GSPC] 1752.50 should be pivotal. Trade thru 1718 targets 1688. Below there: 1645.50. Upside, trade thru 1760.50 targets 1793.
Easy, right? But many traders don’t know how to trade that. So let’s look at it further.
If the reaction to the number isn’t “crazy” go ahead and fade (we’re talking bonds here) the first touch of 131.12. If the fade is no good, the next level down makes your decision for you: the potential drop is over 3 points. So you aren’t going to “work” the trade; you’re going to get out and find a way to get short.
Upside, 135.07 is also a first-touch fade. As I write this (5:45pm CT on 2/5) it feels like strength above 135.07 will be tougher to get than weakness below 131.12.
SPs? I don’t like the fade at 1718; I love the fade at 1645.50. Upside, 1793 will be too choppy to trade. Just monitor who controls it.
Perhaps the number will come out and nothing happens….bonds race up and down 10-16 ticks – and SPs swing in a 5-7 handle range. There’s always plenty of trade in those situations – but this page gives you the bigger picture so if we DO get a lot of volatility you’ll be prepared and know what prices will be important.
The jobs number is still the “main” number and I can’t advise placing orders in the book before it comes out. But the beauty of this number is that EVERYONE pulls their orders so, once you assess the market, you’ll know what orders to place and how to play it.
One final thing: don’t look for what the number comes out at; keep your eyes on the order book(s). Media and other non-traders need to see what it is so they can get it out to their listeners/readers/viewers.
But as a trader, your goal should be to react to the market and trade – so keep your eye on the ball.
Now, I’ve had to slow myself down a bit with this particular number, usually within 15-30 seconds or so I think I know what to do and I start to apply it. But I’m learning that a bit longer pause usually is worth it.
