The 4th of July falls on a Friday this year, giving many of us a day off and a day or two recover from the holiday. The markets in the United States will also have a day off, closed in observance on Independence Day. The marketplace got some fireworks of its own with the Employment Situation numbers Thursday morning.

Jobs Data

Nonfarm Payrolls came in at 288,000, well above consensus estimates of 211,000 – 215,000. The unemployment rate for June fell to 6.1%, down a bit from May (6.3%) and lowest level in nearly six years.  With the numbers in the labor marketing continuing to grow, traders and market observers will begin to wonder how the Fed will view the data.

Fed Rate Hikes

After previously giving hints of a time table to a change in interest rates, the Fed has more recently directed that there is no clear schedule of when a rate hike may occur. The Fed has repeatedly told us that economic data will determine if and when they will look to adjust rates. The long term low interest rate view has driven many investors and traders to a bullish view of the equity markets. The new question may be does good news (job growth, low unemployment) equal bad news for the bulls.

Remember This

There are two things that I have stated before that I still believe. The trend is your friend, and you can’t fight the Fed. Currently the trend continues to be to the upside. Wednesday saw the S&P 500 close at record levels, and the market continued to trade higher on Thursday morning. The talking heads on the financial shows are can’t get enough of Dow 17,000! and the S&P 500 hitting  2000! Everyone loves to watch a market go up, myself included. I also like to prepare for what happens when the run is over.

Trade Idea

Taking a short term view, I am looking to take advantage of a market move in either direction. I like buying the July E-Min S&P 500 1950-1990 strangle at 9 points ($450.00) or better. We are long premium so risk is limited to the cost of entry plus fees and commissions. This is a short term trade with options expiring on July 18. I am setting an initial target for exit at 20 points. If the market doesn’t move much from the current level, I would look to get out with a 4-5 point loss.

Bottom Line

Many of us will be watching fireworks in honor of the Declaration of Independence and the birth of our nation. Market moves can often be similar, shooting high in the sky and ending with an explosion and return to the ground. It’s important to prepare for landing in both situations. Have a safe and Happy Fourth of July.

Webinar

For those interested Walsh Trading is holding our weekly grain webinar today Thursday July 3rd at 1pm central time hosted by our Senior Grain analyst Tim Hannagan. Tim has been ranked #1 by Reuters and Bloomberg in 2011 and 2012 for his most accurate end of year price predictions for soybeans and corn. Registration is free and if you cannot attend live, a recording will be sent to your email upon signup.

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT.  WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.