Next Big Market Move Hinges On Economy, Fed

Like a tennis ball bouncing down stairs, the stock market popped back to positive after a string of losing sessions.

All three major indexes closed in the green today.

Simpler Trading team members expect this bouncing higher, then lower price action to be the dominant price pattern into the end of the year.

Next big market move hinges on economic data, Fed

Gone are the days of stable price movement across the stock market, and Simpler’s traders are positioned to ride out the ongoing erratic cycle.

“These are not normal moves, and the swings seem to be getting even more volatile,” said Bruce Marshall, Senior Director of Options and Income Trading at Simpler Trading.

Each day brings a new challenge with limited predictability across the stock market. To make “heads or tails out of it,” as Bruce would say, traders can look at the economic calendar for clues of the next big move that could hit the market.

Economic news events still ahead include:

• U.S. Producer Price Index (PPI) on Friday.
• U.S. Consumer Price Index (CPI) on Tuesday.
• Federal Open Market Committee (FOMC) meeting Wednesday.

“In the next week we have a lot of data points coming out,” Bruce said. “Then it’s going to come to a head with the Fed.”

As this market has proven all year, any news hinting that the Federal Reserve (Fed) will continue its hawkish plans of raising benchmark interest rates will cause a quick reaction in the stock market.

Right or wrong trades can get “shaken out”

The Fed focuses on the rate of inflation and the market has been reacting like that bouncing tennis ball.

“This is the pattern of the market we’re in right now,” said Bruce who has adapted by working trade setups on shorter time frames whether the market moves lower or higher.

“Even if you’re right, you can get shaken out,” Bruce said. “It’s hard to be on the right side of this market for more than a couple of hours. You have to have stops in place.”

Bruce is keeping close watch over the sizing of his trading positions and the number of setups in play.

“I have been trading very few positions and waiting and watching,” Bruce said. “I think that makes sense here until we get more clarity in the market.”

The market hit another bounce today, including the S&P 500 snapping a five-day losing streak.

In the market today, the Dow closed at 33,781.48 points to gain .55% (adding 183.56 points on the day). The Nasdaq jumped to 11,082.00 points for a 1.13% increase while the S&P 500 added .75% to hit 3,963.51 points.

As Bruce said, clarity for trading plans through the end of the year hinges on the PPI and CPI economic data releases followed by Fed actions next week.

“It’s looking like we’re not out of the woods,” Bruce said.

He is leaning into odds that the market bounces down further after next week, and he plans to stay in cash as a default plan as he watches and waits for more clarity in the market.