Investors Trimming Risk Ahead of Economic Data

Scott Redler |

Stock futures are marginally lower Thursday morning as it seems investors are ready to wait for two big economic numbers that kick off each month. Because the 1st day of the month comes on a Thursday, we have two straight days of market-moving economic data with the ISM this morning at 10am and the jobs report tomorrow. The trend has been towards weakening data, and the Fed showed concern for a stuttering recovery in its most recent Fed minutes. Another round of poor data could trigger a sell-off, or it could set off further expectations of QE3, so the action will be tough to read until after those reports.

In terms of technicals, the market has been acting well since holding previous closing lows early last week. No major support levels have been breached since IBD put us in a confirmed rally. However, yesterday's pull-in off intraday highs was the first real sign that the current rally is getting a bit tired. The result on the charts was a doji candlestick that suggests a possible imminent reversal. The rally did come on very light volume, so it's hard to have a lot of trust in stocks right now.

Now especially is a time to sit back and watch the action and start preparing your gameplan for the coming weeks. While we sometimes develop a hypothesis for trading news events, we are not in the business of trying to predict economic data results or guess on how stocks will react to a certain number. The trader who is successful in the long-term lets the charts do the talking and doesn't put himself in potentially risky situations. The reaction to data this week seems like it will especially hard to predict. I do still think we will get a big move in either direction over the next couple months due to the heavy short interest in the market right now and the volatility of headlines.

The Department of Justice yesterday filed to block the proposed AT&T (T) and T-Mobile deal over anti-trust issues, and that news has had a dramatic effect on the whole industry. AT&T (T) was obviously the biggest loser, and the stock dropped 3.9% yesterday after the news broke. Sprint Nextel Corporation (S) was the big winner, and investors snatched up shares of the company to the tune of a 6% rise yesterday (and another 2% premarket today). Watch these stocks for likely volatility again today.

Big cap tech was relatively weak yesterday, which is another sign that this rally is exhausted for now and we may see some corrective or sideways action in the market. After yesterday's morning push, may investors seemed to be shedding risk in front of the ISM and jobs report. Apple Inc. (AAPL) yesterday showed its first signs of relative weakness, selling off nearly all day and filling a gap from Monday. The stock had hardly seen a seller in sight since the day after Steve Jobs' resignation. We see any continued pull-back on AAPL as a buying opportunity.

*DISCLOSURE: Scott Redler is short SPDR Dow Jones Industrial Average (DIA), PowerShares QQQ (QQQ)

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Symbol Name Price Change % Volume
AAPL Apple Inc. 114.88 -0.71 -0.62 15,629,986
ESCA Escalade Incorporated 12.95 0.70 5.71 14,953
S Sprint Corporation 6.23 -0.13 -2.04 10,586,520
T AT&T Inc. 36.84 0.41 1.13 21,367,129


Emerging Growth

Kiwa Bio-Tech Products Group Corp

Kiwa Bio-Tech Products Group Corp develops, manufactures, distributes and markets, cost-effective and environmentally safe bio-technological products for agriculture in China.

Private Markets

Initial State

Initial State is an Internet of Things (IoT) data analytics & data management platform company. We turn sensor and event data into information that matters by making it easy to…


Lyft matches drivers using their own personal vehicles with passengers who request rides through the smartphone app, and the passengers pay automatically through the app. When using Lyft, passengers have…