The market will not like the government employment report that came out last Friday, but don’t panic. The weak report is not really news. Yes, the market will conjoin the weak report with its renewed desire to freak out about Europe. We will see a bit of a sell off, but the reason I say it is not really news is two-fold. The first part is that we have done this nine times before in the last three years. The government jobs report comes out, it misses big, the market sells off, and then boom, the market settles back into its slow grind up. In those three years, the S&P 500 has risen 107 percent. The second part is that the market understands the data is preliminary, subject to two more revisions. If you remember the last time this happened in August 2011, the breathless media reported it this way.
Zero Job Growth Latest Bleak Sign for U.S. Economy
The market panicked. In September, though, the number jumped back up to 103,000, and then in October, the government added a revised 102,000 to the combined total for both August and September. So, in actuality, 205,000 jobs were created as opposed the original 103,000 for both months. The market apparently liked that, as the market has been steadily climbing since October. One other factoid to point out is the job creation numbers back then were in the low hundred-thousand range or less (zero). Today, the miss leaves us not at zero or less, but at 120,000, which we know could easily be larger in two months. The economy is still going in the right direction. Besides, earnings season starts tomorrow, and that always captures the attention of the market, as that is what the market really wants to see – corporate profits. If those are good (again), the market will react favorably, and Spain, Europe, and the low employment report for March will fade away. Aside from that, there is also the news that doesn’t get huge headlines.
Consumer confidence climbed last week to the highest level in four years and unemployment claims fell, pointing to a brighter job market that may invigorate the U.S. economy.
Now, onto a question from a reader …
How can I be a disciplined trader? My trading strategy work wells, but I cannot make a profit consistently. I think I close my profitable trades when I see some profit, but I do not close my losing trades until they touch the stop line. Please give me some tips.
What I gather from this is that your losses are greater than your wins. Oops! Here are some tips.
- Although it is always good to take profit, taking it too soon can be problematic. Try raising your profit target and consider using trailing stops when you have profit. Tighten those stops as your profit increases.
- Although you will always take losses, I get the impression your losses are too large. Try tightening your downside stops. You might take more losses, but they will be smaller. In conjunction with letting your profits run more, this might just balance out in your favor.
- Recheck your strategy. It might be that your trading timeframe is too tight. Consider widening this out a bit, as you might find this advantageous in this market – assets tend to go up and down in short timeframes – the downs are quick and short, the ups are slow and steady. Buy on the quick downs and play the upside longer.
Trade in the day – Invest in your life …
