Nothing spells a recovery like jobs. A much improved jobs report and pick up in the services sector helped traders stay in the bullish mood for most of the session. This nearly helped the Market stay green for the fourth straight session while laying out a positive scenario for later in the week, when the more important data is slated to be released. But the bulls couldn't keep things green at the close as the major indices finished mixed on the day.

The bullish sentiment started in pre-Market action when the Automatic Data Processing (ADP) announced that private-sector employers cut only 20,000 jobs last month. This was the fewest number of job-losses in two years and the 11th straight month that the figure has declined. In January, the report showed a loss of 22,000 jobs. Meanwhile, the service sector showed an actual increase in job hires for the third straight month, jumping by 17,000 jobs in February. With two-thirds of the U.S. economy revolving around the service sector, the increase should be a very good sign of things to come.

In positive economic trend continued mid-morning when the ISM Services Index was released. The Institute for Supply Management said that its service sector index climbed to a reading of 53 in February. This is up from 50.5 in January while hitting its highest level since January of 2007. The chart below shows the nice rebound in the index.

Graphic from Briefing.com

Of course it wouldn't have been a trading day without more news from Greece making the headlines. The country announced a $6.5 billion restructuring plan today that attempts to cut spending while also boosting its tax revenues. We'll have to wait to see if the result of this latest action soothes any of the concerns that have been plaguing Europe over the past few months.

The selling this afternoon appeared to coincide with the release of the Fed's Beige Book. The survey of the Fed's 12 regions showed that the economy continues to be growing, but at a very slow pace. It noted that the snowstorms have added to the slowness of the economic recovery last month, especially on the East coast.

Oil supplies were up again, but demand is starting to pick up. With the mixed bag in the weekly inventory report, traders focused on the uplifting jobs data. This fueled a nice little rally in crude, helping it to close up $1.19 a barrel at $80.87 on the New York Mercantile Exchange. According to this morning's Energy Information Administration report, crude supplies increased by four million barrels last week. This was above the one million barrel increase that analysts predicted beforehand. At the same time, gasoline inventories increased 800,000 barrels last week. However, the data also showed that demand had risen 3% year-over-year during the month of February. This helped take the sting out of increasing supplies and helped traders focus on the jobs data instead of the increasing supply levels.

Today's Economic Reports

The huge rally on Monday really helped push the Dow Jones Industrial Average higher. For the past two sessions, it has been in more of holding pattern for the large-cap index as traders await Friday's all-important data. For today, the large-cap index rose 9 points to finish the session at 10,396. In the past two trading sessions, the index was able to trade above the old resistance level on the chart; however, it wasn't able to close above it. Let's see if it's able to do this over the next two sessions.   

The S&P 500 also took off like a rocket on Monday and then followed it up with a nice little gain on Tuesday. Today, the index wasn't able to hold onto this morning's nice advance, but it was able to cling to a 0.48 point gain at the closing bell. This leaves the index at 1,118.79 points. Unlike the Dow, the S&P 500 has broken right through the old resistance on the chart from February and now appears to be headed back towards its high for the year, if we get some more bullish data on Friday.

The Nasdaq Composite also had a nice gain going for most of the session, but wasn't able to hold it through the rough patch this afternoon. The tech-laden index finished the trading day down a mere 0.11 of a point at 2,280 points. If the Nasdaq can keep it going, we should see it start to test its high from January on the daily chart. If not, the 2,200 point level would be the major support level for the index.  

The VIX (CBOE VOLATILITY INDEX) just keeps dropping on the daily chart. It shed another 0.23 of a point in today's session, taking the "fear" index down to 18.83 points. Let's see if it can break through the 18 point level sometime in the near future.  

We really couldn't have asked for a much better week. We got a nice rally on Monday followed by two rather calm trading days. The big push higher helped extend our cushions and now the volatility appears to be drying up, which should help the price of our options to wither away even faster. This is what spread trading is all about. Enter the spreads when volatility is high so that we can take advantage of the big premiums and then watch the VIX fall and our profit columns rise.

Of course, we have plenty of time remaining in this cycle so we don't want to count our chickens before they hatch. However, we're feeling really good about the way things are unfolding. Heading into this week we were planning on releasing at least one more spread tonight. But the way things have unfolded this week has taken away some of the good strike prices that we were monitoring. With Friday's economic data being so influential, we are a little nervous about entering any new spreads ahead of the release.

The smart play is to wait it out and then see if there's any premium left for Monday. We have a nice little premium working for us already, so let's not make any amateur plays by forcing another spread. Instead, let's sit tight and take a look at how our positions are setting up heading into the rest of the week.

RUT 560-550 BULL PUT SPREAD (15 contracts entered on 02/23)

RUT CLOSED AT $649.26 Today (89.26 points away from our put spread)

Profit potential of $50.00 per contract

Contingent Stop Order set at $565.00

The small-cap index managed to hold in green territory at the end of the day, but it wasn't a very big gain. The RUT was quite a bit higher this morning, but the afternoon selling took a toll on the index. It finished the session up $0.95 at $649.26. But with its strong performance earlier in the week, our cushion got extended nicely from where we were sitting on Sunday evening. We should be able to sit back and relax in our put spread for the time being.  

PCLN 200-190 BULL PUT SPREAD (15 contracts entered on 02/22)

PCLN CLOSED AT $235.82 Today (35.82 points away from our put spread)

Profit potential of $50.00 per contract

Contingent Stop Order set at $202.50

Priceline didn't have such a good trading day, but we're still up quite a bit on the week. The stock spent most of the session trading lower and finished 5.52 points lower at $235.82. But as we said, we're still better off than we were at the beginning of the week. After the strong start, we figured we'd see some profit taking at one point in time and that happened to be today. Let's see if PCLN is able to bounce-back during the final two trading days of the week and give us some more breathing room heading into the weekend.  

GOOG 490-480 BULL PUT SPREAD (15 contracts entered on 02/23)

GOOG CLOSED AT $545.32 Today (55.32 points away from our put spread)

Profit potential of $45.00 per contract

Contingent Stop Order set at $492.50

We finally got that bounce in Google this week, helping the stock to get that bearish trend turned around. GOOG kept moving up the chart today when it rose 4.26 points and finished the day at $545.32. We'll take that gain on a session when the Nasdaq finished in negative territory, not to mention that the company continues to take a beating in the press on nearly a daily basis. With today's strong performance, we now have a solid 55 point cushion in this spread and like where we're sitting. 

As always, Trade Happy and Trade Smart