Saturday, February 7, 2009

Disappearing Jobs...

Surprising strength today after the release of a horrible jobs number. Today’s trading helps validate one important trading principle: Trade the reaction to the news, not the news.

As traders, we can’t be too quick to pass judgment on whether or not a certain news release will cause the market to rise or fall. Rather than trying to guess, simply play the charts. A great phrase to remember is, “trade what you see, not what you think.” The rationale typically cited for the market (or individual stock) being able to rally on bad news is that the market has already discounted the bad news into the price. In other words, it’s already baked into the cake. Remember the market is forward looking and tries to price in what’s going to happen 6-8 months into the future. Jobs reports are a lagging indicator, thus unless their WAY different than what was expected, the market may still rally off the bad news. Keep this in mind next time we have a potential market moving news release.



AMIT said...

In this recession period many people are losing jobs.

Boise real estate


Like anything else jobs will come and they will go.