Following a bit of “Sell in May and Go Away” behavior the last couple sessions, bulls and bears paused on Thursday in front of Friday’s anxiously awaited monthly jobs data.
For its part, the SPDR S&P 500 ETF (SPY) finished a very flat -0.02% in tight doji conditions above 50-day simple moving average support.
In similar candle fashion, the NASDAQ Composite registered a slightly less modest dip of 0.18%, but below key institutional support lines and striking a fresh 7-week low.
Thursday’s standoff was all about bulls and bears taking a step back, trimming or initiating but without much conviction as all eyes and fingers await Friday’s April nonfarm payrolls data.
In front of the report, Wall Street analysts estimate U.S. payrolls will increase by 200,000 while unemployment is expected to tick lower to 4.9%.
Following Wednesday’s weak ADP data, expectations may be prepared for a more modest announcement. At the same time, what follows on trading floors and desktops around the globe is certainly a matter of always fluid market psychology dictating what’s good or bad news.
At last check, NASDAQ futures were down 0.32% in premarket trading. Dow Jones Industrial Average futures were down 0.3% and S&P 500 futures down 0.37%.
As for Thursday’s under-the-carpet economic data, weekly claims rose to 274,000. The increase was the most in five weeks, but historically low and marked the 61st week of sub 300,000 readings — the largest such stretch in more than 40 years.
Equity Options Most Active
Equity options activity Thursday improved upon its modestly bearish trend with the CBOE total put/call ratio of increasing to 1.20 from Wednesday’s 1.10 reading.
Volume for all listed products slipped from 3.76 million contracts to 3.23 million. Half of the total tally was concentrated in SPY, which saw 1.61 million options change hands. The top equity, and equally a nonsurprise, Apple Inc. (AAPL) traded 433,000 contracts.
Of the more unusual options volume in Thursday’s session, Weatherford International Plc (WFT) and Alcoa Inc (AA) are two other companies worthy of a more in-depth inspection.
Weatherford International Plc
Oil and gas services outfit Weatherford was drilled by -24% in technical activity akin to a deep probing of its year-to-date and 15-year low of $4.95 established in January.
The company posted a wider-than-expected Q1 loss of 29 cents and weaker-than-forecast revenues of $1.58 million, sending shares of WFT cratering down to $5.67.
At least one heavy-hitting options trader in WFT hasn’t entirely given up hope and wagered on a decent-size, short-term bounce.
Of the twelve-fold surge in options trading, roughly 25,000 contracts and a full 30% of the volume was in the May $6.50 calls. Of the volume in the out-of-the-money call, 20,000 was confirmed as opening purchases between 23 cents and 28 cents before finishing the session at 16 cents.
Alcoa Inc
Dow constituent and aluminum concern Alcoa saw 61,000 July $11 call / October $12 call diagonals trade Thursday. With shares near $10.15, the spread fetched 4 cents and has a slightly short directional bias due to the lower strike, shorter-term July call.
Larger open interest in both AA strikes prevents knowing whether the trader was opening, closing and buying or selling for that matter.
Hypothetically, an opening buyer would like nothing more, both literally and figuratively, than for AA to finish just below $11 at July expiration — then explode higher and have the virtually free October $12 call, go quickly in-the-money.
Apple Inc.
Regarding Apple in Thursday’s trade, the volume did have a bit more of a purpose as far as hedging and/or speculation is concerned.
In front of Friday’s payrolls data, the company has proved a market drag as the largest company in the S&P 500, one down more than 11% in 2016 — and putting together a third and tenuous technical test of its flash crash and February low.
As of this publishing, investment accounts under Christopher Tyler’s management do not maintain positions in any of the securities or their derivatives mentioned. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
