Bears started Friday with all guns blazing. The S&P 500 (SPX) splattered to an early 1.2% loss on a crazy hot November payrolls report, states Jon Markman, editor of Strategic Advantage.
That's when bulls sneaked into the battlefield and nearly overwhelmed the sellers. With a nice flourish at the end, the benchmark index finished the session at 4,072, a decline of just 0.1%.
Some of the recent buying is seasonal. Professionals normally put money to work in the last month of the year as they chase performance. I expect pros to be aggressive buyers of beaten-down technology stock groups in particular ahead of the Producer Price Index and Consumer Price Index reports due December nine and 13, respectively.
The failure on Friday by bears to kill the rally this week’s rally, given the hot jobs numbers, also changes the narrative. Traders are starting to feel the market is bulletproof. That's a big swing in sentiment.
Key support for the benchmark is now 4,021. Resistance is 4,097, then 4,300. Continue to consider buying pullbacks ahead of the PPI and CPI reports.
The Trade: Our current position is ProShares Ultra S&P 500 (SSO), an exchange-traded fund that provides two times the daily return of the SPDR S&P 500 (SPY).
- Purchased: Dec. at $48.29, the opening print.
- Friday close: $50.45, up 4.5% from entry.
- Place a new order to sell the entire position at a target of $55.52 lmt gtc.
- Lift the stop loss order to $47.65 stp.
- The potential upside gain of this trade is +15.0%. The potential downside risk is -1.3%.
