"Always bear in mind that your own resolution to succeed is more important than any other." -- Abraham Lincoln
Door Number Three
If you went to bed early last night, or if you simply managed to avoid crossing paths somehow with the 24-hour news cycle, you probably had expectations for today. You likely thought that the U.S. employment data and the potential confirmation by the U.S. Senate of Neil Gorsuch to the Supreme Court, would dominate the headlines. Maybe you thought that market nerds like myself would focus on the screaming move off the bottom by multiline retailers as an industry. Well, you thought wrong.
You almost certainly know by now that the U.S. launched a military airstrike against the Assad regime in Syria as a response for that regime using chemical weapons against its own civilians. The strike specifically targeted the military airfield from which the chemical attack against those civilians had itself been launched. The obvious players around the world either applauded, or criticized the move by the Trump administration, lined up as you might think. Markets also behaved as you might think, at first moving to extreme levels prior to moderating throughout the overnight session.
Stephen Guilfoyle, the author of this report recently sat down with TheStreet's co-founder Jim Cramer, currencies columnist Douglas Borthwick, bond writer Peter Tchir and precious-metals maven David Yoe Williams to discuss trading strategies April. Click here for more coverage of our April Trading Strategies package.
Chariots of Fire
Let's first look at oil. The knee-jerk reaction to almost any military moves in the Middle East is always the purchase of crude futures, as the thought of any escalation of hostilities raises the expectation for a slow down on supplies. Overnight highs had Brent trading around $56 and WTI close to $53. Wouldn't you love to have those levels back? Market prices, though still much higher than before the strike, are off of those highs; but even prior to these airstrikes, the momentum in the space has clearly been to the upside.
Before writing off these overnight moves for crude, keep in mind that despite surprisingly high levels of inventory and despite U.S. refinery activity that's screaming along at 90.3% of capacity, resulting in the production of 9.2 million barrels a day (14-month high), WTI crude was already trading at a one-month high ahead of this military action. You see, gang, EIA estimates for gasoline demand have been rising week after week. But wait, there's more.
OPEC's (and friends) seemingly benign production cuts may be having more of an impact than one thinks. Oh, it may be like watching grass grow, but "crude at sea", which I'll define as crude either in transport, or in storage aboard ocean-going vessels, is down some 16% since year's end. That's significant. Sure, U.S. inventories are high, but due to either inability or negligence, nobody else keeps such precise records. How much supply is there in Asia? in Europe? Beats me. Spin the wheel. Win a prize. We just know that the U.S. is pumping, and that there is now a lot less of the commodity afloat, while that demand for the stuff is not going lower. Hmm.
Extremely short-term, I would think that if you see another run at the overnight highs, a trader coming in long the space might want to take a profit prior to the weekend. I am long a couple of equities in the oil patch, and I will be watching this open. I told you at Jim Cramer's roundtable that I'm wearing some Schlumberger (SLB) - Get Report , with a goal of building out that position. However, that name has hit trouble at $80 for a month. You pay me $80 today, and I'll say "sold", with the intent of re-establishing my long either later this afternoon, or next week.
The Other Safe Havens
On top of those oil moves, gold and Treasuries ran like escaped prisoners as well. It's no secret that nervous people, and people looking to capitalize on the emotions of nervous people, both buy gold. In the immediate wake of last night's airstrike's, the yellow stuff ran all the way to $1271 an ounce, and has found a recent perch at $1266, still up more than one percent overnight. You see signs of support at this level, and that support will become technical. My target then becomes $1315. In what now, seems like the most timely financial interview in my memory, best-selling author Jim Rickards explained (here, at TheStreet) the impact of both financial, and kinetic warfare on safe haven assets, particularly on gold. If you have not already seen this interview, it's in your best interest to listen in.
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Earlier this week, I accidentally hit a six-run homer in the retail space. My wife, fine lass that she is, distracted me with a phone call for about a half hour on Wednesday. I was already pretty busy doing interviews and writing articles. I had some orders layered in names that I am comfortable trading. Later on, I realized that I was long Kohl's(KSS) - Get Report (I thought that I was flat), and that I was flat Walmart(WMT) - Get Report (I thought that I was long). Well, yesterday luck was on my side. I did tell you that I'm Irish, right? WMT swam the wrong way on a good day for the retailers, and KSS ran 5% with the crowd. (The crowd goes wild). Kooky, ain't it?
Well, I have not changed my thinking. I do not suddenly believe that the retailers are about to embark on a 99-yard touchdown drive. I will, sometime after the open, correct these positions after I watch them behave a little longer. I'll buy WMT around $70.80 with or without the accompanying sale of KSS, and if it pays, I'll write some WMT puts with strike prices at my levels going out two weeks or so. That decision, I will make on the fly.
Employment Situation (March) - 08:30 ET
Non-Farm Payrolls:Expecting 177,000, February 235,000. This data-point is the day's, and perhaps the month's, headline event. Earlier this week, the ADP Employment Report showed a third very strong month in four for job creation. The majority of those jobs created came for small to mid-sized firms, which is a sign of growing business confidence. This is where your knee-jerk will come from, and a similar beat today would be taken very well by the futures markets.
Average Hourly Earnings:Expecting 0.3%, February 0.2% m/m. This will be the day's second most focused-upon number. A disappointment here can take some mustard off that knee-jerk if they don't jive together all that well.
Average Workweek:Expecting 34.4, February 34.4 hours. This secondary way of measuring both demand for labor and income growth will get a look, but not at first. This is more of an analyst's data-point than one for the traders.
Participation Rate:Expecting 63.0%, February 63.0%. The most impressive thing about the February employment situation was the rise in participation that coincided with an actual drop in headline unemployment. Another win in both spaces in probably more than we can hope for.
Unemployment Rate:Expecting 4.7%, February 4.7%. The expectation is for no change in this space today, which is what we saw for March in Gallup's data yesterday. Gallup's unadjusted U.S. unemployment rate stands unchanged at 5.6%, which is actually a positive, because Gallup's participation rate improved for the month from 67.4% to 67.8%. Gallup's data is not truly comparable to the BLS numbers, but they do tend to move together, so these numbers are useful.
Underemployment Rate:February 9.2%. Underemployment (U-6) dropped alongside unemployment in February. If Gallup serves as any guide, we could see improvement in this data for March. Gallup's underemployment rate fell to 13.5% from 13.9% for the month.
Wholesale Inventories (February):Expecting 0.4%, January -0.2% m/m. Inventories at the wholesale level have already flashed this month at a 0.4% m/m build, which, if realized today, would go a long way to showing an improved business inventories print one week from today. This would be the third month of four in this series to show decent growth.
Fed Speaker:New York Fed Pres. William Dudley is set to speak from New York City. Dudley, who currently holds a permanent voting slot at the FOMC table, will discuss financial regulation and possible reform. Don't discount the possibility that Dudley impact the marketplace with some policy talk, especially coming on the heels of Wednesday's Minutes. There will be questions asked at the conclusion of this event.
13:00 - Baker Hughes Rig Count (Weekly):Last Week total 824, oil 662. The rig count, particularly those producing oil in the Permian Basin, keeps on rising. Recent price action in the space will do nothing to slow this down, and could even broaden the base geographically.
15:00 - Consumer Credit (February):Expecting $14.4 billion, January $8.8 billion. Watch this one, gang. The January data came in a bit sideways, with revolving credit (credit cards) actually contracting. Another month of that would be taken poorly by the markets going into the close. Don't forget that student loan, auto, and credit card delinquencies are all scraping highly elevated levels at this time. You would think that could put the hurt on both spending and the extension of further credit to do so.
Sarge's Trading Levels
These are my levels to watch today for where I think that the S&P 500 and the Russell 2000 might either pause or turn.
SPX: 2370, 2364, 2358, 2350, 2344, 2337
RUT: 1373, 1365, 1358, 1350, 1341, 1335
There are no meaningful quarterly earnings releases schedule for today that have caught my attention.
Related news on TheStreet:
- Raytheon Stock Up Premarket Following Syria Missile Strikes
- Raw Video: U.S. Launches Missiles on Syrian Air Base from USS Porter & USS Ross
- Stock Futures Waver After U.S. Attack on Syria, Ahead of U.S. Jobs Report
- Oil's Air Strike Spike Could Lead to Longer-Term Lower Prices
At the time of publication, Stephen Guilfoyle was long SLB, KSS, although positions may change at any time.