Last month was the strongest July we’ve had in years, so naturally I came into the week a little bearish. As you know, I have a bit of a contrarian streak in me. I tend to bet against exaggerated moves to the upside and vice versa.
Part of the reason July was such a bullish month was because rates came down. The market got ahead of itself when it looked like the economy was slowing down and that the Fed wouldn’t be able to raise rates as aggressively. Things got a little out of whack…
But then the jobs number dropped.
There were a few different scenarios I outlined depending on where the number came in, with two out of the three situations leading to bearishness and selling. And any time there’s a clear bias in one direction, that’s where my trading will lean. I play the odds.
And sure enough, that’s what we saw play out Friday morning following a massive beat on those nonfarm payrolls. And yes, it might sound counterintuitive for markets to fall when unemployment fell more than expected, but I’ll explain why…
The Average True Range is a technical indicator that measures volatility by decomposing the entire range of an asset price for that period. Simply put, a stock experiencing a high level of volatility has a higher ATR, and a low-volatility stock has a lower ATR. The ATR may be used by traders to enter and exit trades, and it’s a useful tool to add to a trading system. It was created to allow traders to more accurately measure the daily volatility of an asset by using simple calculations. The ATR does not indicate the price direction — rather, it is used primarily to measure volatility.
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