A double dose of downbeat economic data weighed on stocks today, as reports on business activity and unemployment gave the bears courage. First, the Institute for Supply Management-Chicago’s business barometer fell to 58.8% in March, marking a steeper-than-anticipated slide from February’s reading of 62.6%, and pointing to milder-than-forecast manufacturing activity in the Midwest. Elsewhere, the ADP’s employment report indicated that private-sector firms issued 23,000 pink slips last month – a surprise to economists, who predicted a gain of 40,000 jobs. With the Labor Department’s highly anticipated nonfarm payrolls report slated to hit the Street on Friday, today’s dismal data left an ominous taste in the mouths of bulls, prompting the major indexes to settle south of breakeven.

This week has to be taken with a grain of salt as it is a short week and volume has been on the light side.  Therefore any market moves can be exaggerated and we won’t draw conclusions or change our outlook with light volume dictating the action.

The SPX remains solidly above key support and certainly within striking distance of the 1180 resistance level we have been writing about.  We remain cautiously bullish and willing to stomach the sharp and quick reversals we’ve seen the past few weeks.  That has to be expected as we trade in the upper end of this range and especially when we are trading on light volume.

Weekly Economic Calendar:

Thursday

  • Thursday brings the weekly report on initial jobless claims, as well as February’s construction spending, the Institute for Supply Management’s manufacturing index, and automobile sales for March. CarMax Inc. (KMX) is scheduled to report earnings.

Friday

  • Friday ends the week with March’s non-farm payrolls and the unemployment rate. There are no earnings reports slated for release.

New Trade Idea:

No new trades tonight due to the long weekend and expected low volume tomorrow.  We should have new trades here in our Sunday night update.

Open Positions:

Buy Western Digital (WDC) April 39 Puts @ 1.20 or better:

The stock is breaking support lines here and with an uncertain week ahead of us we could see a sharp pullback in the tech names.  Continue to hold and use $2.00 as a target and .65 as a protective stop-loss.

 

Buy MGM Grand (MGM) April 12 calls @ 1.00 or better:

The sector is breaking down and we closed our calls today.

Research in Motion (RIMM) April 75 calls @ $3.20:

RIMM reported after the bell today and although some areas showed growth and progress, other parts of their earnings report disappointed and the shares traded lower after the close.  Their conference call seems to have boosted confidence as the shares are off of their lows.  Continue to use $5.60 as a target and $1.85 as a stop-loss.

 

Written by Dan Micovic