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When Bad News is...Bad News

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The stock market can be quite mystifying. Depending on the mood of the market, good news can be interpreted as bad news, bad news can be seen as good news and every once in a while good news and bad news are seen just as described. It's one of those things that can throw traders for a loop and add to the challenges of trading.

This Friday we saw a very weak jobs report which on one hand could be seen as good news since it now keeps the Fed from raising interest rates in June and possibly July. But, based upon the market reaction, you can see that traders were disappointed in the weak jobs numbers because the Fed had been telegraphing recently that they were all set to raise rates, and now those plans are on hold.

Below is a chart of the GDX which is a gold miners ETF. It had been very weak lately with the US dollar climbing and the prospect of an imminent rate hike. But that all changed on the bad news that came out Friday with investors quickly shifting their dollars out of the stock market and into gold.

This move higher in the GDX is not insignificant. In one fell swoop it reversed course, closing above all key moving averages, just when it looked like the chart would break down completely.

So this is what traders have to deal with; interpreting if news is good, bad or indifferent. So instead of feeling confident that the best place to put funds to work is in the stock market, that all changed with one very bad jobs report.

The hallmark of a good trader is to shift strategies when called for. If you are a perma bear or a perma bull and are unable or unwilling to shift as necessary it's going to be a whole lot harder to get good results. So instead of trying to label news as good, bad or neutral, be prepared to make whatever changes are necessary once the market signals become clear. 

At your service,

John Hopkins

EarningsBeats 

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