Good is Bad, Up is Down

Nonfarm Payrolls this morning came in hotter than expected, with the economy adding 336k jobs in September, well above the consensus estimate of 170k jobs. That's great news for people who are in need of a job! The economy added jobs, which means people got a job (or a second job), which for people is definitively good news. The markets, however, decided it was undoubtedly bad news, with NQ losing a cool 200 points in 5 minutes.

As traders, it's frequently hard to understand the distinction between good news and bad news, especially when dealing with economic data that we, as real people, feel each and every day of our lives outside of the screens. Jobs sound good! But then the larger implication is that the economy is still too strong, which could be bad for inflation, which will cause Jerome Powell and the Fed to hold rates higher for longer, which is bad for equities. Fed swaps traders have now fully priced in their first rate cut for September 2024, or one quarter later than they had previously been betting on. They're finally starting to believe Powell and the Fed when they talk about need to hold rates at an elevated level for some time.

So while the news is good news for people, who we have an emotional connection to, it's also bad news for the things that we deal with every day in trading. Separating those two is inherently challenging. That's why we never try to guess what direction news is going to go--don't let your preconceived thoughts or feelings try to predict what the markets will do. As the saying goes, the market can remain irrational for longer than you can remain solvent. Don't try and figure out what is truly good or bad--just trade the chart.

Here are today's NQ levels:

Current Price: 14720

Upside Targets: 14740, 14782, 14818, 14865

Downside Targets: 14680, 14633, 14600, 14586

Stretch Targets: 14535 (and 14468 if we really need lower), 14922 (and 14955 as a second upside stretch)