Case research – Trading catalysts

The US
Jobless Claims yesterday came out much better than expected. This is the
most timely indicator we have on the labour market.

The market
reacted strongly, with the S&P 500 (chart below) rallying by
2.4% in a single day, which was the best one day gain since November
2022.

WHY THE MARKET REACTED LIKE THAT?

You need to know the underlying reasons to understand the market reaction.

Last
Friday, the market got spooked by a surprisingly weak US jobs report
where the unemployment rate jumped to 4.3% from 4.1%. We saw a wave of
risk-off flows that eventually got exacerbated on Monday.

Now,
there’s been a debate about the legitness of the data as there were good
arguments for a negative short-term impact from Hurricane Beryl.

The US Jobless Claims quelled those fears and increased the confidence that the NFP report might have been indeed just a blip.

Therefore,
the market priced out the fears and went back into a more positive risk
sentiment, lifting risk assets like the S&P500.

That was a
nice tradable catalyst. No matter if you are a scalper, day trader or a
long term trader. That was a trading opportunity.

Retail traders generally avoid such events. The majority don’t trade them because
“trading the news is gambling”. That’s unfortunately is a retail myth
made popular by (you guessed it) influencers/marketers/scammers.

Many
got wired to wait for a perfect setup or to wait for the price to come
into a certain technical level and so on before taking a position.

The
market doesn’t know you exist, it’s not going into your level if there
are reasons to go immediately into a certain direction.