S&P Setting Up for Jobs Report, VIX Broke Out Recently.

The S&P chart looks to be setting up for the jobs report. It is forming a triangle of confusion and the ultimate trend decision will be made toward the point. Traders are anticipating the jobs report along with ugly 4th quarter earnings. The S&P is also sitting right on the 50 day moving average and a break below that could bring a herd of sellers. Also the VIX broke out of a monthly downtrend recently with traders probably positioning for continued market anxiety. A Marketwatch survey of economists predict 500,000 jobs will be lost in December. The reaction will depend on the psychology threshold of market participants. If the number comes in better than expected the market could rally but if it's worse than expected the S&P could break the 50 day and go into free fall.

The recent bids in the VIX were probably anticipating this event. Traders could've been scooping up volatility on the cheap to set up straddles or strangles to play a move in either direction. Try Option Monster, Daily Options Report or VIX and More for more info on S&P options (VIX). These next couple of months at the CBOE could get very interesting.


SPY (S&P ETF)

VIX (Volatility Index)


Job losses expected to be worst since WWII
(Market Watch)

"U.S. businesses cut jobs at a rapid pace again in December, analysts say, worsening a trend that could produce the largest quarterly job loss since America demobilized its war economy after beating Hitler. The Labor Department will report on December's nonfarm payroll report on Friday at 8:30 a.m. Eastern, with economists surveyed by MarketWatch expecting payrolls to fall 500,000 after the 533,000 loss in November. Ian Shepherdson, chief domestic economist for High Frequency Economics, said payrolls could fall by 700,000, the worst in 60 years."


Volatility returns as options fear gauge surges
(Thomson Financial News Via Forbes)

"The vacation is over,' said Joe Kinahan, chief derivatives strategist at online brokerage thinkorswim Group in Chicago. 'The VIX has been hovering between 35 and 40 for quite awhile as players sold options, the path of least resistance during the holiday season.' Kinahan said that players were back to buying options in anticipation of Friday's key jobs report, the first major economic measure for this year."


US Jobs Won't Disappoint
CNBC.com Video

"Stock markets are going to surprise on the upside and Friday's employment data is not going to be as disappointing as analysts are suggesting, Rob Stein from Astor Asset Management LLC told CNBC Wednesday."