Hope Grows On Jobs Data, Stock Market Rallies

Stock market participants are taking any sliver of good news and running with it in this volatile trading environment.

The Labor Department jobs numbers released Friday showed a slight decline from previous monthly job growth along with an unanticipated lower unemployment rate of 3.5%.

Stock market buying took off like a rocket during the cash session, despite the number of new jobs added in December being higher than economists forecasts.

In this wild market, good news has been bad news and sometimes, like today, a sliver of good news creates a sharp uptick across the stock market. The team at Simpler Trading works to avoid these emotional outbursts among market participants and focus on trade strategies that rely on technical analysis.

Jobs data sends stock market into sharp rally

The nuances of data showing overall fewer jobs and lower unemployment fueled euphoria through market participants, sending the stock market into a feverish Friday rally.

Total nonfarm payroll employment increased by 223,000 in December, and the unemployment rate edged down to 3.5 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in leisure and hospitality, health care, construction, and social assistance.

Notable job gains occurred in leisure and hospitality, health care, construction, and social assistance, the report stated. Payroll  employment rose by 4.5 million in 2022 (an average monthly gain of 375,000), less than the increase of 6.7 million in 2021 (an average monthly gain of 562,000).

Hints of lower numbers within the report ignited buying across equities as stock market participants interpreted this as data that might encourage the Fed to back off hawkish monetary policies. The Fed has held firm that it will keep raising benchmark interest rates through 2023.

In the market today, the tech stocks and the Nasdaq took the lead in gains with the index closing at 10,569.29, up 2.56% on the day. The S&P 500 followed suit with a 2.28% gain to 3,895.08 points. The Dow also pushed higher, reaching 33,630.61 points to gain 2.13% (spiking by 700.53 points on the day).

Focus on key moments in time for trading

The team at Simpler Trading is taking a less feverish view of the first big rally of 2023.

“I think it makes sense to focus on those moments in time, before your trade execution, and be willing to go into the end of the day or the next session with relatively light exposure,” said Henry Gambell, Senior Managing Director of Options Trading at Simpler Trading. “Look at what this data brings us and then be able to react to it with a fresh set of eyes from a day trading point of view.”

Henry focuses heavily on scanning for new setups, managing open trades, and walking traders through new trades. He looks at the markets with a trend-following, conservative take. He can be found diving into the live trades during the Simpler Options chat room sessions at the opening bell or into the close.

No crystal ball for predicting market moves

What lies ahead is yet to be determined, and no financial pundit can be the seer of the ticker tape.

“My crystal ball has been in the shop since the day I started trading,” said Raghee Horner, Managing Director of Futures Trading at Simpler Trading. “I don’t want to pretend I know what price is going to do. I do want to encourage traders to know what to do if prices reach certain levels. Rather than predicting levels, let’s talk about which levels we’re going to react at.”

While the stock market started 2023 still choppy and uncertain, corners of the market aren’t as sketchy with some tickers in uptrends within various sectors such as industrials and healthcare. Raghee works to identify more stable movement within these areas.

“We’re going to be hard pressed to find trending clarity in the indices even in some of the major sectors, but we will be able to find trends – up or down – in individual stocks,” Raghee said.

She continues to stick to her day trading strategies, an adaptation required during the extreme volatility throughout 2022.

“Day trading is very much going to be my go-to strategy,” Raghee said. “I’m going to be very choosy about daily (chart) time frames that I get into and I’m going to really require of myself that I focus primarily on trends.”

Day trading allows Raghee to find trends in individual stocks even if the sector isn’t in a trend.

“Think about the time frames you are using,” Raghee said, pointing out that she defaults to a 5-minute chart when evaluating potential trades.

She also watches the hourly chart to gauge volatility in 60-minute chunks throughout the day. Volatility is her key in tracking trends in an uncertain market

This year traders must determine where they plan to focus their trading.

A nuance Raghee will apply going forward is to expand to some intraday time frames that will span 60 to 240 minutes (the 1-hour and 4-hour charts) to identify trends.

But she won’t be chasing nuances from data reports that can cloud the mindset of market participants.