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The economy added just 29,000 jobs in September, far fewer than the 84,000 expected.
Bonds rallied on the news Friday morning… then the 10-year Treasury yield climbed right back to its highs before the close.
So it’s no surprise when I asked the team what they’re watching this week… CJ and Bryan both flagged warning signs. Nate – an agnostic trader if there ever was one – sent over a stock he’s tracking in this environment.
CHRIS “CJ” JOHNSON | 10-Year Treasury Yield (TNX)
The 10-year yield remains at the top of my watchlist. Friday’s weaker-than-expected jobs report initially sent yields sharply lower, giving investors hope that the recent parabolic move was finally breaking. That didn’t last.
Don’t whistle past this graveyard. I’m watching 5.35% to 5.4% on the 10-year and 20 on the VIX.
New 3-month highs in both would tell me investors have given up hoping rates will provide relief and are ready to sell. That selling could be fast and aggressive, but it should also create some great buying opportunities.
The VIX measures how much movement options traders expect in the stock market over the next month. When it climbs above 20, traders are getting nervous.
BRYAN BOTTARELLI | New Highs vs. New Lows
A key metric that I keep track of every week is the number of companies setting new highs versus the number of companies setting new lows. This past week, the gap continued to widen.
On the NYSE, there were 72 new highs versus 757 new lows. On the Nasdaq, it was 268 new highs versus 986 new lows.
With 5 to 6 times as many companies setting new lows versus new highs, it solidifies my feeling that market sentiment is shifting over to bearish, which is why I’ll continue to be cautious in our trading and positioning.
New highs and new lows show how many stocks are taking part in a rally. The S&P 500 is still near its highs, but far more stocks are falling to new lows than climbing to new highs.
NATE BEAR | Fastly (FSLY)
I’m watching Fastly (FSLY). Smaller stock, high short float (15%) and a very attractive weekly chart. I’m looking for a move into the $40s this year.
They are software, not hardware, offering edge cloud computing and infrastructure services. And we have played it a lot in both Daily Profits Live and Profit Surge Trader.
Fastly runs a network of servers around the world that helps websites and apps load faster and stay secure. Last quarter, its revenue hit a record $183.3 million, up 23% from a year earlier, and it raised its forecast for the full year.
About 15% of Fastly’s tradable shares are sold short, meaning traders are betting the stock falls. If it rises instead, those traders may have to buy shares back, and that buying can push it even higher.
Keep CJ’s levels in front of you this week: 5.35% to 5.4% on the 10-year and 20 on the VIX. If both make new 3-month highs, he expects fast selling, followed by some great buying opportunities.
Bryan is staying cautious while the new lows keep piling up. Nate’s looking to trade Fastly with a target in the $40s.
Earlier this year Nate and his readers booked a 100% winner on Fastly. He targeted the stock using his “earnings profit surge” strategy… and this week he is hosting a FREE Four-Day Earnings Profit Blitz, live each day at noon Eastern.
If you want to see how he trades earnings season for winners like Fastly, start here…
