Hello trader,
Friday's jobs data comes out at 8:30 am EST.
With hardly any earnings or data points before then, the unemployment release should drive this week's market.
But is that actually true?
We're told that economic indicators matter...but do they really?
I want to start this week's jump by taking a look back at all the releases from the start of the pandemic…
Because you might be surprised at what we found.
How jobs Friday impacts the markets
I looked at how markets traded the week of a jobs release during the pandemic and prior.
The results were interesting.
Let me lay out some quick data points for our discussion looking at the 6 recent releases.
- On jobs Friday, the market closed higher than the open 3 times and lower 3 times
- On jobs Friday, the market closed higher than the prior day's close 4 times and lower 2 times
- On jobs Friday, the market closed higher than Monday's open 4 times and lower 2 times
As you can see, there isn't much of a pattern as to whether the market closed higher or lower.
But here's some really interesting stats:
- Down Fridays were nearly twice the move of up Fridays
- When down days happened on Friday, they accounted for the majority of the decline for that week
- When Fridays were up, they often accounted for a small percentage of the week's gains
In layman's terms - if Friday is a down day, it's usually the worst day of the week.
But, if Friday is an up day, it's usually paltry compared to the rest of the week.
And here's the best stat - only once was the Monday of job's week a down day (last month).
In fact, looking back at the last 11 releases, there has only been a negative Monday twice.
So, if history repeats itself, then Monday should turn out to be a positive day.
However, what we can draw from this data is the following conclusion: Markets tend not to care about the jobs numbers.
If the market was headed lower on the week, the jobs numbers don't reverse it, nor if it was headed higher.
And considering it's a 50/50 split as to how Friday turns out, all we can really say is the downside surprises have had a greater impact than the upside ones.
That's not to say it won't have a larger impact on the economy and outlook over time. But the immediate tradability of it (outside of intraday trading) is negligible.
Focus on this instead
If jobs aren't likely to drive the markets then what is?
That's easy - The Fed.
Just take a look at last week's statements by Jerome Powell to see how his very words shook up the bulls.
Now, without him gabbing to Congress this week, we're left with proxies for what he's thinking.
And the biggest one - the U.S. dollar.
In the last 10-15 years, the dollar hasn't mattered much to equities.
Recently, as in the past month, it's started to have a strong negative correlation to stocks.
No comments:
Post a Comment