The stock market is at a crossroads and the challenge for retail traders is making sure they can track the next turn in the road.

Prices dropped across the broader market again today with all three major indexes suffering losses after holding largely flat yesterday.

This pop-and-drop environment is more of the same as it has been the last year. Traders will need to keep watch for upcoming signs that could dictate market action.

Post-Powell syndrome affects market action

The stock market appeared to suffer from post-Powell syndrome a day after the central bank chief testified before Congress.

Federal Reserve (Fed) Chairman Jerome Powell spent two mornings this week on Capitol Hill. Market reaction was jittery at first and downright panicky today during another frantic session sell-off.

The Dow closed at 32,254.86 points to tank by 1.66% (dropping 543.54 points on the day). The Nasdaq dropped to 11,338.35 points for a 2.05% crumble while the S&P 500 fell by 1.85% to 73.69 points.

Stock market action doesn’t appear to be settling down from back-and-forth, straight up-straight down intraday price movement.

“This market continues to be pretty treacherous,” said Bruce Marshall, Senior Director of Options and Income Trading at Simpler Trading.

Wild price action each session creates a “good and bad” trading scenario, he said.

“It’s easy to make money in this market, but it’s also easy to be wrong very, very quickly,” Bruce said. “You can be right for 20 minutes and then have a galloping run away from you either up or down.”

Bruce had to adapt over the last year. He went from holding trades for days to weeks to tracking and exiting setups within hours and no more than a few days. He said this was necessary to maintain a profitable trading plan.

“This is really turning into a day trader or scalping market – get in and get a quick profit and get out,” Bruce said. “That’s really what’s been working. It’s been like this for a while.”

While it can be easy to enter a winning trade, the exit to profit may not be so easy for those not following all the economic news affecting the market.

“It’s not easy,” Bruce said. “It takes a little more work and dedication.”

Traders must remain on Fed watch

“Fed speak” – whenever a member of the central bank steps out into public for a speaking engagement – is at the top of Bruce’s list of “what to watch.”

Powell made it clear this week that the Fed will continue to do whatever it takes to fight inflation. This includes raising federal funds interest rates at a faster pace and higher than expected if needed.

“That in itself is kind of scary,” Bruce said. “The Fed wants to see if employment is ticking up or ticking down. That could be a big market moving event. We have to be careful trading this.”

The economy is not slowing down – consumers continue to spend despite higher prices – and the Fed is adamant about slowing down the economy.

“It can be a downward spiral,” Bruce noted.

Signposts ahead with economic data releases

Traders face a “wait and see” uncertainty leading into upcoming economic news events which are signposts at this crossroads of the stock market.

The next economic news signpost is the nonfarm payroll report set for release tomorrow. The Fed watches closely for any jobs report that doesn’t fit its goals.

Nonfarm payroll data will be followed by the next U.S. Consumer Price Index (CPI) report set for release March 14 and then the U.S. Producer Price Index (PPI) on March 15. The next Federal Open Market Committee (FOMC) meeting – a regular meeting of Fed central bankers – is set for March 21-22 with the announcement of the latest federal funds interest rate hike. The stock market was expecting a 25 basis point (bps) hike, but has shifted to expecting a 50 bps jump… or more.

“It’s so important to keep an eye on all that,” Bruce said. “We’re at the crossroads where we could go a little bit higher and then I think, in my opinion, we fail or we could immediately fail and drop a lot.”

Bruce believes the stock market will resolve all the data updates but it will take months. He said any sustained direction is unpredictable and hinges primarily on future Fed actions.

“That’s just the market we’re in,” Bruce said.

Manage risk, watch economic data news

Bruce executes few trades at any time, maintains tight stops on all setups, and manages risk like a hawk.

Bruce knows there is much to watch ahead for traders: economy, stock market, more aggressive rate hikes, slowing down home sales, people losing jobs, inverted yield curve, etc.

“Really watch your risk,” Bruce said. “Manage your trades more than you have in the past and maybe think more about day trading.”

And, absolutely know when the next economic data points are being released, he said.

“It does not mean you can’t make money in the market,” Bruce said. “It’s just a different way of trading.”

To trade with Bruce live during stock market sessions, check out this online community of traders.