Market News 9-1-23

The Market 📈

The markets continue to squeeze the shorts (a common 2023 theme) as we see stock prices float higher with decreasing volume.

The bulls are tiptoeing in and the bears have not come back with supply during a time without opposition. What an amazing moment for us to trade and study.

So today we have a bunch of economic data, we have a three day Labor Day weekend, and a new month begins.

This type of price action might be driving some of you nuts, but it’s a great lesson to put into your experience bank. Anything can happen. And when you’re ready for that possibility, you’re never shocked or stuck holding the bag on a losing trade.

Sure it’s easier and more fun to trade when stocks go straight up without a pause. But honestly, how often does that happen?

Larry Williams once famously said “I expect every trade to be wrong.” Thi is a man trading since the 1960’s who turned $10,000 into $1,100,000 in twelve months.

Is he a negative dude? Pessimistic? No. It was his mental trick to prepare himself for trades going in the wrong direction. It was a discipline technique. But the discipline that we need on the losers, we also need on the winners.

As much as the back and forth is annoying, we need that same conviction to hold profitable trades. You need to trust your system. And this is what separates those struggling to those making bank.

The ability to trade your system, to trust your system, the ability to shift from crappy markets to amazing, comes from a mindset that anything can happen.

Stop predicting. It’s not possible. Just ask Michael Burry and his $1.6BB trade. I’m not knocking him, not at all, he’s made a fortune. What we’re saying, learning from him, is that predictions are a guess. What’s happening now is a fact.

Paying attention and having a plan is much easier, much more fun, and ultimately more profitable. (Assuming you have a good edge)

Isn’t that why we started trading in the first place?

Trading Education 📚

Today we have Nonfarm Payrolls Data coming out at 8:30 AM EDT. It’s good for savvy traders like yourself to know why it’s important.

– Job growth – The nonfarm payrolls report provides the monthly change in total nonfarm employment. Stronger than expected job growth typically signals a strengthening economy and can boost stock prices, while weaker job growth can drag down stocks.

– Unemployment rate – Declining unemployment suggests more economic growth ahead, which can lift stocks. A rising unemployment rate can signal economic weakness and lead to stock declines.

– Wage growth – Nonfarm payrolls also tracks average hourly earnings. Faster wage growth can signal rising inflation pressures, which can negatively impact stocks if it leads to higher interest rates from the Federal Reserve. 

– Fed policy – The jobs report is a key data point for the Federal Reserve in setting monetary policy. An exceptionally strong or weak report can shape expectations for interest rate changes. Rate hikes typically create headwinds for stocks.

– Sector impact – Job gains or losses in specific sectors can directly impact sentiment around industries and move related stocks. For example, tech job growth may lift tech stocks.

– Recession odds – Sustained weak job growth increases recession risks and worries for corporate profits. This can spark broader equity market sell-offs.

So in summary, nonfarm payrolls data has a significant influence on market expectations for growth, inflation, monetary policy, and recessions – all key drivers of stock prices.

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