Today it became perfectly clear why the bottom dropped out yesterday: unemployment, predicted to hold steady at 5.7%, rose to the 5-year high of 6.1%. “But those numbers didn’t come out until 8:30 this morning,” you may say, “how could today’s numbers possibly have affected yesterday’s market?” to which I would have to answer, “people with money find things out early.” And to think all this time I thought insider activity and information was illegal. Apparently legality doesn’t affect the real market movers.
Unless my analysis isn’t nearly deep enough, which could very well be the case and probably is. It seems that, throughout recorded economic time, when the dollar gets stronger, unemployment increases. Since the dollar has been gaining strength, knowledgeable market followers may have speculated that the unemployment data that came out today would be worse than anticipated. I like this explanation better because it lets me think that, with the enough insight and analysis, I too can predict major market happenings a day in advance and still not have to kiss up to the big wigs.
Whatever the reason was, the market sold off big yesterday and until 11:30AM this morning, it seemed as if the sell off would continue into day two. But there was a rally and many of the financials shone through. After yesterday’s rating cut of National City (NCC), its stock dipped 6%. This morning, amid a sea of down premarket numbers in the financials due to the unemployment report, National City was trading a penny up, and the stock closed the day up 1.4% after staying in the green from 1:30PM to close. Even though it was just a penny up this morning, the fact NCC was up at all after a rating cut attests to the fact that the market has extreme attention deficit issues and these days, the financials are extremely resilient to bad news.
I transferred some money into my brokerage account this morning and have a weekend plan to learn all I can about buying call options so that on Monday during my 20 minute lunch break I can buy one contract of either Triad Guarantee (TGIC) even though I vowed to stay away from that equity, Community Bancorp (CBON), or a stock that I already own such as PMI or ABK. If I’m guessing right, based on the market’s dismal outlook, premiums will be relatively low on far out expiration dates and therefore the potential to make some real money is there. Although, I really don’t know what I’m talking about quite yet. I’ll consider this step two of my experiment.
After the unemployment numbers scared the pants off the market sending us into a recession, a rally started at about 11:30AM and a late day super rally started at 3:45! It fell off a tiny bit by a few mounted before closing bell, but recession reschmession! I bet that early this morning when the market was headed straight south would have been a great time to pick up a call option, especially right before the rally that was spontaneously triggered this afternoon, but I need to do more homework first. I want to make sure I fully understand what I’m doing before jumping in so as to avoid any more major mistakes (think AROX). Speaking of AROX, it closed today at 0.15. I’m glad I got out when I did.
The Dow closed the day up 32 points to $11,220 after at one point during the day being down 150. My guess is that the same big wigs who sold off yesterday know something good is about to happen next week. Maybe if I knew the market a bit better the numbers would tell me so. Afterhours prices were up after the closing bell, but a lot can happen over a weekend. Oil fell $1.66 to close the week at $106.23 a barrel. I gained back half of what I lost yesterday. Not a bad take on a day that had such a dismal beginning.
All eyes are on Hurricane Ike, which is possibly headed straight to the Gulf of Mexico. As for this weekend in New England, here comes Tropical Storm Hanna.
