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All-time High In Sight
www.oneoption.com
Yesterday the market broke out of a minor compression and it is within striking distance of the all-time high.
PRE-OPEN MARKET COMMENTS THURSDAY – The market was able to shoulder a weak ADP report yesterday and 32K jobs were lost in the private sector during the month of November. In the absence of a jobs report, ADP is carrying more weight. This should cement a rate cut next week and Fed Fund futures are pricing in an 89% likelihood of that happening.
ISM Services came in at 52.6 yesterday and that is a solid reading. This morning initial jobless claims fell to 191K and that is one of the lowest levels for the year. That would suggest strong employment, but I don’t trust these numbers. The government is still trying to recover from the shutdown, these numbers have been wrong all year and they are not consistent with reports from private companies. Challenger, Gray & Christmas reported that planned layoffs so far this year are up 54% compared to last year through the first 11 months. This is the highest level since the 2020 pandemic when the entire economy was shut down.
China is issuing general licenses for rare earth exports to ease trade tensions with the US. This is good news.
The market is focused on the 25 basis point rate cut next week. Each month that ticks by, we are one step closer to Powell being replaced. There’s little question that he will be replaced by someone more dovish. That would seem “market friendly” for 2026, but rate cuts only support the market during the early stages of the easing cycle. Eventually, weakening economic conditions take their toll and the market declines.
The Fed can only control the short end of the curve. Long term rates have been trending higher because our largest sovereign debt holders (China and Japan) have been selling US Treasuries. TLT is testing the 100-day and 200-day MA.
We are short-term traders so we will focus on what’s in front of us. I liked the market breakout yesterday and I feel that prices will float higher into the FOMC next Wednesday. This happened in October before the rate cut and then the actual statement was a “sell the news” event.
I have been selling some put premium this week and I have some cushion heading into next week. Most of the puts expire in the next two weeks and I am not selling any more premium. I believe that the rate cut next week could spark some selling and I like to sell puts into drops, not rallies.
I will try to find one or two day trades. The price action has been challenging and a brief dip this morning would provide a good entry point.
Overseas markets were generally higher.
Support is at $684 and resistance is the all-time high.
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