Here’s what the jobs report really means
Dave Landry is principal of Sentive Trading, a money management firm, and a
principal of Harvest Capital Management. Mr. Landry is the author of two top
selling books,
>Dave Landry’s 10 Best Swing Trader Patterns And Strategies and
>Dave Landry On Swing Trading.
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Hey Dave
Explain the reaction to the jobs report.
Okay, the market rallied because the jobs report came in very low. This
report suggests low inflation because the economy is not growing. And, low inflation is good for
stocks. However, everyone soon came to their senses and realized that if
the economy is not doing well, then companies (stocks) must not be making as
much money, so then stocks sold off. So you see, it’s easy—a low jobs number
is good for the market because it means low inflation but its bad for the
market because it means a slowing economy. Got that? Now you know why I just
look at charts.
On Friday, the Nasdaq initially rallied on a aforementioned punk
report but soon found its high and began to sell off. It found its low around
mid-day and then drifted sideways to higher for the remainder of the day.
The S&P put in a somewhat similar performance but was a little choppier
and did manage to close in the plus column.
The S&P has now retraced 50% of its recent downtrend. This action puts it
an inflection point. If it trades higher, I’m not sure that I’d turn
outright bullish, but I would certainly take note and become somewhat less
bearish.
The Nasdaq still only appears to be pulling back from lows.
So what do we do?
The market still looks vulnerable. So,
continue to focus on the short side. However, since the S&P is at an
inflection point, you might want to wait for it to tip its hand (i.e. turn back
down) or, at the least, wait for entries.
As far as setups, Broker/Dealer looks poised to
resume its slide out of a pullback from lows.
Lehman Brothers
(
LEH |
Quote |
Chart |
News |
PowerRating), in that sector, has formed a pattern
similar to a “Witch Hat” (as usual, email me if you need the
rules).
Hey Dave
Sometimes I don’t know if you’re suggesting that a
stock will go up or down.
Trade in the direction of the big blue arrows.
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. If you would like a free
trial to my trading service, click
here.