Volatile Market Giving Way To Uptrend?


Simpler Trading Team

Oct 14th 2021  .  3 min read

Panic buying does not appear to be underway, but difficulty finding staples and goods in this economy has had an impact on traders looking to catch trades in the sea of volatility.

In the midst of earnings season – the period when many U.S. publicly traded companies report their quarterly earnings – the market spiked higher today heading into the end of the week. Investors, who are hopeful to see good earnings from companies, may be disappointed as stocks may experience wild price swings due to economic activity.

Many investors could see fluctuations in their portfolios as the volatility expands to the broader market. This week investors saw financial and industrial reports released and are awaiting technology earnings next week.

In a volatile earnings market, Simpler’s traders are ready to move in any direction. Still treading in choppy waters, they are cautious and not making significant commitments to long or short trades.

While the uptrend does not appear broken, at this time it appears it could fall back into a downtrend, chop in the middle, or rally higher. Signals indicate this is not a directional market.

Simpler’s traders are adhering to technicals and charts and applying them to small, light trades. Traders who look back at the one-year charts will notice the market trends for any stock or index when quarterly earnings report. These historical charts can be applied to the trading strategy across stocks or indexes.

Our traders know it’s never a good idea to jump into murky waters with both feet, especially as they await a trend to develop after the earnings reports.

Traders can still find opportunities for trades in the midst of volatility. The S&P 500 has the potential for diagonal trading. Simpler’s traders have executed double-calendar trades in the Russell 2000.

When September meeting minutes were released by the Federal Open Market Committee (FOMC), this gave investors some insight into the future of bond market interest rates. The Fed is moving closer to tapering, or reducing the purchases, of $120 billion per month purchases of Treasury and mortgage-backed securities.

The Fed has conceded that inflation is here to stay for some time and has dropped the term “transitory.”

Why the change?

As an example, supply chain bottlenecks and chip component shortages have increased costs across the board. This affects a wide range of electronics and vehicles. Some consumer goods are unavailable for purchase from walk-in stores – many of whom are finding it difficult to keep their shelves stocked.

The shortages are obvious to anyone watching the markets or their home expenses.

At this time, Simpler’s traders are waiting to see if there is a black cloud on the horizon or a return to blue skies. This makes for a cautious trading climate.