Good News Is Good News By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - Jobs report puts a lid on multiple rate cuts in 2025…
- Even if it’s painful now, good news is actually good news…
- The optimism breakout keeps surging…
- What two genius traders think about Friday’s price action…
- Gold is another key breakout to watch…
- Put the Seasonal Edge in your corner this year…
Last week’s jobs report took almost everyone by surprise… The whiplash continues… On Friday, nonfarm payrolls blew out analyst expectations, showing U.S. job growth of 256,000 jobs added in December. The median consensus estimate was way off the mark at 165,000. The U.S. economy is exceptionally, resoundingly strong. Yield curve disinversion, entrenched inflation, high interest rates, and other issues aside… The one thing you can’t knock on the U.S. economy is its labor market. 
Investors drew conclusions quickly. The key one being, with the labor market in such great shape… There’s little argument for continued interest rate cuts in 2025. Indeed, expectations for the federal funds rate by year-end rose to a range of 400-425 basis points, indicating a possibility of just one rate cut in 2025. Good economic news proved to be interpreted as bad short-term market news. The S&P 500 continued its 2025 losing streak, falling 1.6% by 11:15 a.m. ET. The stock market is now at the same level it was before the November election. And you know what? I’m a buyer. | Recommended Link | | | | Bill Gates calls it: “The most transformative technology any of us will see in our lifetimes.” Eric Fry agrees, saying it’s far more advanced than anything today… including AI. But he also warns it could send millions of Americans into poverty. Take these 3 steps to prepare. |  | | Good news is good news, actually… This is a great market if you’re in it for the long term. You get to buy stocks at lower prices in a great economy. Who doesn’t want that? Consider, for a moment, the alternative. Imagine the jobs report dropped last week and showed a surprise to the downside of just 74,000 jobs added, 91,000 less than expected rather than more. Sure, we would be more likely to get rate cuts. But would you feel confident in the longer-term direction of stocks? I don’t think you would. The Federal Reserve isn’t supposed to cut rates because it wants a higher stock market. It’s supposed to cut rates because the economy is in trouble and needs support. The fact that it’s not doing that is incredible news. It means we’re slowly making our way toward a new normal of monetary policy that, compared to the 10 years before COVID, is actually normal. The whiplash is growing pains. The 10-year yield hitting 5% is growing pains. All of it is necessary to get us to a properly working economy. If you’re a short-term trader, you might love this market even more. You can trade the trends, or the dislocations, or the seasonals, and make a ton of money while Wall Street panic-sells on headlines. You could’ve, perversely, gone into the jobs report optimistic and bought put options to benefit from that optimism. If that’s not enough to convince you, just consider the fact that the last two years of market performance are some of the best back-to-back returns in history… And they came during a period of high real interest rates. Are you in a rush for the Fed to slam the brakes and cut rates to zero again? Well, count me out. I’m not alone… Remember a couple months back when I pointed out a breakout in optimism in the U.S. economy? That breakout did what breakouts do. It kept running. Here’s a chart from Apollo Global: 
From 40% of households in mid-2024, now about 54% of households have a positive outlook on the economy in the next six months. The last time we saw a surge in optimism like this was back in 2016 when Donald Trump was elected. And guess what? The trend sustained. Optimism persisted until the pandemic, hitting a then-14-year high of 60%. Do the math. The jobs report shows everyone is working. The stock market is at all-time highs (even if today it feels like a disaster). People are optimistic. We should be too. If you’re a long-term investor, I urge you to zoom out and, if you’re flush with cash, add to your favorite holdings. With the news that fewer rate cuts are coming, maybe bias those adds toward cash-rich large caps. If you’re a trader, check your bias and understand that the things other traders are panicking about are an opportunity. Two of the best traders I know, William McCanless and Jonathan Rose, both have bullish outlooks right now. Though, not blindly bullish. Here’s what William, editor of Trade Cycles and analyst for our brand-new Seasonal Edge strategy, had to say in his January Game Plan: So, after reviewing these strong historical correlations, what are my overall views on the market going into 2025, particularly from now into March? [Earlier in the issue, William reviewed the seasonal patterns as well as historical price action correlation for the S&P 500 going back to 1951. Subscribers can check out the full update here. And I’ll also recommend reading the introduction to the new Seasonal Edge strategy here, which contains 11 new opportunities for January.] I think it’s time to get strategically bullish. I think the markets are likely to rise overall into March and that the long side is also likely to prevail as the right side to take on the markets. But I also think it could be choppy and not as powerful a rise as many would hope. […] We’ve got a twofold strategy for this month. First – I want to look for strong uptrending stocks that the market is constantly buying, that have experienced a dip, and have ultra-strong seasonality – I’m talking 80% or higher. Second – I want to look for stocks that have higher volatility (meaning more room to run) that are trading at areas of support and are experiencing a divergence. What is a divergence? In the simplest terms, it’s when the price of an asset is going in one direction while a momentum indicator like the Relative Strength Index (RSI) is going the other way.
Here’s an example from Alaska Air Group (ALK): 
Source: TradingView When the price and momentum indicators are opposed like this, it typically means that the “engine” under the hood of the market’s price action is either revving up or cutting off, even while the price still looks like it’s strongly trending one way or another. In short: You want to buy dips on quality, seasonally strong stocks as we move through January. (Our CEO, Keith Kaplan, and I showed you one such opportunity Saturday.) Here’s also a valuable snippet from Jonathan Rose’s Friday update, part of his daily series of free trading education, which you can sign up for here: We can’t let this short blip of fear and uncertainty lead us down the garden path. And there’s a larger point here that we can’t lose sight of… The Fed isn’t the only thing catalyzing the broader stock market. After today’s news – and with a whole series of catalysts on the horizon – I’m actually more bullish than ever that the markets are poised to run higher through the year. And while the markets are on the move, we have our pick of which sectors to focus on next. If you’ve been paying attention to the Masters in Trading website, you’ll know that I’m extremely bullish on a whole range of sectors – everything from quantum stocks and drone technology to nuclear energy, just to name a few. In the coming weeks, we’ll dive deeper into the opportunities these sectors are presenting – and the major market catalysts that will boost them for months to come. In today’s Masters in Trading Live at 11 a.m. ET, I’ll explain how today’s jobs report is affecting investor sentiment – and why we should look past the initial overreaction to focus on some key market-catalyzing events that will boost my favorite sectors throughout 2025. Write those themes down: nuclear, quantum, drones. If tech is going to dominate once again in 2025, these will be the more niche pockets to watch ahead of the mainstream crowds. That said, we can’t ignore the gold bugs… Gold, being so hated for so long, is kind of easy to forget about. Hasn’t it been replaced by bitcoin by now? Not quite. Gold stocks put on quite a show in 2024, even beating stocks: 
Even as recently as Dec. 6, we told you to be bullish on gold based on the positioning of the smart money. Now it’s up more than 2% and well ahead of stocks for the year: 
Though we did get one thing wrong in that piece. We said that gold stocks are a good opportunity to play as the gap closes. Now, with the Fed’s rate reduction campaign slowed to a crawl… You may well be better off owning the metal instead. Especially now that we’re seeing this big breakout. Shortly after we got bullish gold, it surged up to the $2,717 level to match its previous November high. That set the second reference point in a falling resistance line that we just smashed through off of today’s jobs report. I really like the look of the gold chart here. And wouldn’t you know it, the Seasonality chart of the SPDR Gold Shares ETF (GLD) looks even better: 
From now through the end of March, gold has historically gone on a solid run. On average, it’s been 4.19% higher over this span, and it’s been positive 13 out of the last 15 years. (2012 and 2020 were the exceptions… the former being the beginning of a gold bear market, and the latter being the COVID panic crash.) An average return in gold this year would put it just below all-time highs… a very good place to be indeed, especially with seasonality showing a historical push higher into April and an even higher peak later in summer. With gold, we can put the pieces together just as we can with the economy. Gold’s primary use is as a hedge against volatility and inflation. With a new Trump administration, a lot of investor anxiety about interest rates, and clearly entrenched inflation becoming the “new normal,” we can expect gold to remain a popular bet. Keep a portion of your portfolio there. Finally, a word on Seasonal Edge… It took them 2.24 quintillion tests to do it (not an exaggeration, the computing power we have at our disposal here is massive)… But our research team was able to take TradeSmith Seasonality signals, like the ones I just showed you with GLD, and hone them into a rapid-fire profit strategy. It’s simple to follow: Every month, you get a list of our Seasonal Edge stocks – the ones with the strongest seasonal patterns for the month ahead. Then, when the day comes that a seasonality window is set to open, we use a proprietary confirmation signal to let you know if it’s time to pull the trigger. It’s just a handful of trades a month, buying and holding stocks… But that simple strategy has outperformed the market 2-to-1 in our backtest, delivering gains 83% of the time since 2006. Our new subscribers are already using this strategy, with the first batch of trades available to review and buy signals to come. To see Seasonal Edge in action, be sure to check out the replay of Keith Kaplan’s free webinar on the topic and get involved before our next batch of trades. To your health and wealth, 
Michael Salvatore
Editor, TradeSmith Daily | 
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