Data, Events Escalate Stock Market Volatility

In this article:

• Risk mounts in market volatility
• Multiple events happening quickly
• What is the team following now?

Where is this market going?

From losses last week to sharp chop this week to a rally higher today, market predictability has become even dicier.

Hang on, because this ride through the stock market is building toward even more uncertainty.

The next couple of weeks will expose a wide array of economic data, earnings reports, and monetary policy meetings that could derail unsuspecting traders.

Data, Events Escalate Market Volatility

This is a trader’s market.

Sitting on the sidelines in cash (while a valid strategy) and watching this rollercoaster won’t add gains to the trading account.

Traders understand that volatility creates opportunity. They also understand that staying active – trading this market – is risky. And market volatility is expected to surge in the next couple of weeks.

The team at Simpler Trading has actively followed the news and events impacting this market and shared how they intend to trade the activity.

So, what’s on the calendar ahead that Simpler’s traders are watching?

Key data reports – economics or jobs – along with Federal Reserve (Fed) actions are highlighted on the Simpler Trading calendar. Here are key events happening soon:

• Consumer Price Index (CPI) – The CPI measures consumer costs for important staples such as housing, gasoline, utilities, and food. This index (June data set for release on Wednesday, July 13) shows how inflation is holding at 40-year record levels.
• U.S. Producer Price Index (PPI) – PPI tracks the change in wholesale cost – the price of goods sold by manufacturers. Rising wholesale prices bleed through to higher costs for consumers. Continued labor and supply chain issues are expected to be reflected by the PPI (June data set for release on Thursday, July 14) showing more inflation across the board.
• Non-Farm Payroll (NFP) – This report (set for release on Friday, July 8) measures U.S. workers outside farming, such as employees in construction, goods, and manufacturing.
• Federal Reserve (Fed) – The next meeting is July 26-27 and the Fed has indicated intentions to further raise base interest rates by .5% to .75% in efforts to curb inflation. The last .75% rate hike was the largest single rate hike since 1994. A double-whammy may follow the Fed meeting as final, official second quarter GDP results from the Fed are expected to be released on July 28.
• Earnings season – This has been a back-and-forth topic among traders who are cautious following first quarter earnings reports. While some reports beat expectations, the market reacted negatively to earnings with downside pressure. The bulk of second quarter earnings reports are set to begin releasing next week. Previous disappointing earnings reports have traders expecting weak corporate guidance that could send the market reeling.

Combine these events with indicators showing a recession at hand and this forms a gloomy picture ahead in the market.

Continued negative economic data has spurred more intense calls that a recession is underway or will hit consumers and the economy more quickly than estimated. Often a recession is not officially “called” until after economic reports show two consecutive quarters of negative growth in the gross domestic product (GDP).

As all these events play out, market volatility is expected to continue or even increase, and traders must adjust accordingly.

Simpler’s traders continue to pursue opportunities within the volatility, and there is potential for those willing to take the risks and work the trades. 

“This has not been an easy market to trade,” said Bruce Marshall, Senior Director of Options and Income Trading. “I don’t think it’s going to get better anytime soon. Be careful. On these rips higher be ready to fade them on the downside.”

Pros offer insight into testy waters

This stock market has presented some testy waters for retail traders, especially those looking for a way to trade with a professional.

Simpler Trading put together an online community like never before – a free trading room. This online training chatroom is designed to allow traders to experience the insight from a professional trader during live market hours.

There is no cost to join, and this opens an opportunity to meet our team of traders working to share what they experience daily as stock market retail traders. Learn more today.

Rally opens ‘fading’ potential

A strong rally Thursday sent a new twist through the market.

In the market today, the Dow closed at 31,384.55 points to gain 1.12% (adding 346.87 points). The Nasdaq spiked to 11,621.35 points for a 2.28% increase while the S&P 500 jumped 1.5% to 3,902.62 points.

This is the type of spike higher where Simpler’s traders look to “fade” the other side.

Fading in simple terms means taking the opposite position of a fast move either higher or lower. Fading the rally higher today would mean taking trade positions tomorrow that anticipate the market or a particular stock “fading” lower after the rally.

The simpler team keeps an eye on the S&P 500 (/ES) as an across-the-board standard for market movement. From there traders follow personalized watchlists to target price movement and tickers following the broader market.

In a volatile bear market, which tickers to follow and which ones to toss aside becomes a daily adjustment.

What the team is watching to close out the week and prepare for next week:

• The S&P 500 has gained this week in a move that pushed the index up to its 21-day moving average. This is the benchmark for Simpler traders watching market movement.
• The Nasdaq also fared better this week with gains that put this index back above its 21-day moving average. The rally today is significant as it pushes the Nasdaq closer to a move back above its 50-day moving average.
• Large cap stocks in the Nasdaq are showing signs of gain after losses last week. Software stocks are also gaining along with semiconductors, but all remain in an overall downtrend.
• Energy stocks have struggled and continued weak economic growth may create headwinds for energy. Benchmark crude oil was trading below $100 per barrel before rebounding to $102 today. The $100 price level is a significant target that signals strength or weakness. 

Knowing these events isn’t enough.

Traders should research the events and any effects on the market and be ready with a plan to trade the events unfold. These are sure to cause dips and rips in the days ahead.

Why fight alone against the volatility?

Trading requires learning skills and diligent research, and at Simpler Trading we understand the time commitment to trade well.

We started the Simpler Options online trading chat room years ago to help traders find out more about who we are in the world of trading.

Try this online training and trading community today and get access to pro-level traders with decades of real-time market experience.

Manage risk, shorter time frames

The year is halfway done, but this market is not done with volatility.

Simpler’s traders plan to continue working shorter time frames, cautiously managing risk, and looking for trade opportunities as the market unfolds.

And, in keeping with a long-standing motto at Simpler Trading, don’t lose your ass on a Friday.