Looking ahead to post-labor day trading, there are a few things that will be important to watch. Besides the expected volume increase it will be important to see which sectors emerge as leaders and laggards next week. As new money comes in, paying attention to relative strength & relative weakness can help us navigate markets.
Specifically, I will be watching to see how telecom and utilities do compared to tech and financials. Telecom and utilities fell in August but now with what would be expected to be a delay in a rate hike until Q4, these sectors should be on watch for cash to come back into these sectors. If we see a little continuation Tuesday I will look to go long XLU and VZ through either calls or short puts. The October 50 XLU calls at $.75 seem like a good r/r as do the October 52.5 VZ calls for $1.15. Should we see bids come in big cap tech this might be an indication of a more risk-on sentiment going into Q4 and we could start playing for breakouts. Should the SPY break out above 220 on strong volume I think this is a buyable breakout as it would most likely coincide with a MACD reversal to the upside. In addition, we can use 215 as a stop. I do not expect a breakout above 220, but this is just a what if scenario.
Next weeks notables I believe will be BABA, AAPL (iPhone event Wednesday), TWLO, XLF, and VXX. For BABA it looks like it has the potential to break 100. Despite this potential, I will look to do a premium sale on BABA as the options have gotten expensive. The reason I did not do one today is because Tuesday has the potential to breakout above 100 and would rather wait to see it stall before putting a trade on.
AAPL has its iPhone event which I expect to be a sell the news event like usual. Seemingly, the new iPhone will not a be a major improvement and if history is any indication the stock will sell off. I would look for a move back down to 105-106 next week. Should option prices increase going into the event this will be a good premium selling opportunity.
TWLO looks to have caught some fire today and I will watch it for a continuation trade Tuesday. The options are pretty expensive so I will most likely look to just buy the stock rather then buy the options. I would look to play for a move back to the low 60s, with a stop of around 55.
With the jobs report coming in weaker than expected today I was surprised the XLF did not dip. I would expect there to be relative weakness in the financials as I think the odds of a September hike dropped with today’s number. One can continue to use 48 as a pivot point on C; I think it will stay below this level and will look to sell a call spread next week if the price is right.
VXX has been decimated of late, as expected, with the market slowly grinding higher it will be interesting to see if the VIX/VXX gets a bid early in the week.
Potential breakouts to watch:
NFLX above 100
Names I expect to continue to remain range-bound: