Markets are choppy today after the SPY traded to all time highs yesterday on lighter volume. We get the Non-farm payrolls number tomorrow at 8:30am ET, and the ADP private payrolls Wednesday showed a bit of a slow down. Combined with a decrease in the job openings number from Tuesday, the market is pricing in that there just may be enough of a slow down in the economy to allow the Fed to let up a bit and get one or two cuts in by the end of the year. The Feb meets next Wednesday, June 12th, yet nothing will happen at that meeting, although the market will be focused on what Chairman Powell has to say depending on tomorrow morning's jobs number for the month of May.

ADP showed that pay is still going up 5% for those in the same job, and 7.8% in those changing jobs. While those numbers are down from the highs, they are still influencing inflation and that lag will persist for a bit.

Even if the numbers are weak tomorrow, and the Fed sees room to cut, the focus then may shift to whether the slowdown in the economy may begin to impact the actual economic numbers that have driven earnings and this market to all time highs. The market has already priced in another cut just in the last week of trading with the 10 year yield at 4.29%, down from almost 4.63% at the end of May. 

I like the set up for a short ahead of tomorrow's jobs number. We are going short the S&P using bearish ETFS. You can either buy the 1:1 bearish ETF which is the SPDN (Direxion Daily S&P 500 Bear 1X Shares), or if you're looking for more exposure and volatility you can buy the SPXS which is the Direxion Daily S&P 500 Bear 3X Shares - choose which one is best for your trading style, or choose neither if you're not comfortable going short when there is a very real chance this market pops at 8:30am tomorrow morning, and you won't be able to exit the trade until the opening bell at 9:30am ET.

Direxion is a sponsor, but there are great ETFs regardless and this is just a short term trade. 

Choose one:

Buy SPDN - It is currently trading at $12.13. We are going to hold this through the close, and then our stop tomorrow will be if it trades below today's low.

Buy the SPXS - It is currently trading at $8.41. We are going to hold this through the close, and then our stop tomorrow will be if it trades below today's low.

This is a high risk trade, especially a 3X leverage ETF going into the jobs number, but I like the risk vs. reward set up. Should be an interesting Friday of trading.

Stay tuned for updates!

 

 

 

 

 

 

 

 

 

 

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