That was one ugly jobs number that came out on Friday. We knew it would be bad, but it was still a shock to confirm that 20 million jobs were lost in one month. Despite the bad news, markets went up! Thankfully, one technical indicator can help us navigate this crazy bear market.
But first, let’s talk about why markets are rising on bad news.
The US unemployment rate is now 14.7%. Economists agree it will probably rise higher over the next few months. Yet on Friday, the SPX 500 closed at a new weekly high, which means that people are still buying stocks even though the economy is in shambles.
Markets have priced in volatility
This seemingly bizarre contradiction occurred because the stock market is a forward-looking discounting mechanism. The sobering economic news has already been priced into the markets. It doesn’t matter if you’re a bear or a bull – it is frustrating both types of traders. The bears are looking for lower lows, while the bulls are waiting to buy on a dip. When a dip opportunity does come around (like it did two weeks ago), bulls get weak in the knees, fail to follow through and markets go sideways.
The markets will always make the crowd look foolish, and right now it’s doing a great job of it. When uncertainty permeates the atmosphere, “experts” pop up like prairie dogs to offer their best advice. Ignore it and listen to the message of the markets. The markets don’t lie. They will guide you to the right investing or trading decision; doesn’t matter whether you are a bear or bull.
Follow this one technical indicator
The best way to navigate a bear market is to follow the price action. Price is king – now more than ever. In the end, the market will do its thing. You can go with the flow or choose not to. Just some advice: Do the former and not the latter.