Another day, another bouncing ball to track in an “insane” stock market.

The current environment has retail traders in a state of ongoing anxiety trying to figure out any sustained market momentum. Over the next few weeks the nervous Nellies must contend with inflation pressures, a new slate of economic data releases, “Fed” speak, and expectations of rising interest rates next month.

All these variables can be “dream killers” for traders not expecting what lies ahead.

Nonfarm payroll report set to hit stock market

The U.S. nonfarm payroll employment report will hit the stock market before the opening bell on Friday.

Traders are on edge for how the jobs report will affect the market. Higher than expected job numbers with less unemployed could send the stock market reeling. The Federal Reserve (Fed) wants to stifle economic growth. A surge in jobs supports Fed plans to further raise interest rates in November, which the market doesn’t want.

“This has been an insane market and it keeps getting a little more insane with each day we trade,” said Bruce Marshall, Senior Director of Options and Income Trading at Simpler Trading. “We’re in a dream killer market.”

Bruce justified his assessment based on months – pretty much all of 2022 – where the market reacts to economic news such as Fed plans, inflation reports, and job numbers by gapping down or spiking higher with no warning. The only grounds for the sharp moves, Bruce reasoned, is an emotional response from market participants – those nervous Nellies.

The Fed has been a huge driver of the anxiety and uncertainty prevalent in this market.

“This is probably one of the more difficult markets I’ve ever traded,” said Bruce, who has traded for 34 years.

Fed central bank members, who are part of the Federal Open Market Committee that dictates benchmark interest rates, have held public appearances this year at a level of regularity that Bruce has not seen.

He pointed out that in any given week one or two Fed members could make a statement that the stock market deems “right” or “wrong” and the magnitude of price reaction creates whiplash for traders. The same applies to unexpected economic data – such as inflation reports.

The U.S. Producer Price Index (PPI) and U.S. Consumer Price Index (CPI) numbers are next week. CPI measures consumer expenses for staples such as housing, gasoline, utilities, and food. PPI tracks wholesale cost changes – the price of goods sold by manufacturers.

PPI and CPI will roll out on Wednesday, Oct. 12, and Thursday, Oct. 13, respectively. The next Fed meeting is set for Nov. 2.

Adding to the mix of uncertainty is the onset of the third quarter earnings season with many companies set to report starting next week.

Bruce, and market analysts in general, isn’t expecting a positive earnings season. Various key companies in key sectors – such as technology and energy – have already lowered performance expectations.

“The trend is down and will remain down, but it all depends on the data that comes in,” Bruce said.

In the market today, the Dow closed at 29,926.94 points to fall 1.15% (dropping 346.93 points on the day). The Nasdaq fell to 11,073.32 points for a .68% stumble while the S&P 500 lost 1.02% to 3,744.52 points.

Bruce is encouraging traders to mark key news events – economic reports and Fed meetings – on their calendars and be prepared to adjust trading strategies as needed.

“Keep a close eye on that calendar and be ready to anticipate what could happen in either direction,” Bruce said.

Traders have to follow what the stock market is doing as it relates to these events, Bruce said, and it’s a constant whipsaw.

Bruce is continuing his adjusted strategy of shorter-term trades (including day trades), scalping, end of day/cash settled trades, and generally taking profits as he can without holding trades too long.