Stuck in Neutral: Why the Market Ignored a Strong GDP Report

[Image] Stuck in Neutral: Why the Market Ignored a Strong GDP Report I’m not gonna sugarcoat it, traders… The market is very confusing right now. This week was all about the [Gross Domestic Product (GDP) report]( which shows how much the economy is growing. This report was really good, showing a 5.2% quarter-over-quarter gain versus estimates of 4.9%. But for some reason, traders didn't react much to it. The major indexes were basically unchanged on Wednesday. So, what was the reason for this muted response? And how can we predict how the market will react moving forward? Keep reading and I’ll show you… The Market’s Unusual Reaction Usually, when the economy is doing well, we’ll see a boost in stock prices. But this time, the market didn't seem to care. It's like everything's stuck in a weird quiet phase where nothing much is happening. No action mode. There's something else that's strange too... The stock markets in China and Hong Kong are having a really tough time, and it's like nobody's paying attention. In the past, if China's market dropped 2%, it would usually cause a stir in U.S. markets, especially for businesses dealing with stuff like raw materials and commodities. But this week, the markets don't seem to be working like they usually do. Why aren't people reacting to big news or changes in the market like they normally would? I think a big part of this is because of how the stock market has been acting lately. Back in mid-October, the stock market took a big hit, dropping 6% in ten days. But then in November, we got this violent snapback rally. The SPDR S&P 500 ETF Trust (NYSEARCA: SPY) is up 10% this month… SPY YTD daily chart — courtesy of [StocksToTrade.com]( This kind of rapid change back and forth can mess up the normal ways markets work (and how traders react). Why the Market is Acting Strangely There could be a few reasons for this… First, the world economy has been through a lot recently, like the COVID-19 pandemic and several wars, which have changed trader sentiment. Market participants may be more careful now, not wanting to jump to conclusions based on the usual signs. Also, because the stock market has been whipsawing so much (and so fast), people might be getting numb to these price swings. This could explain why the market’s not reacting much to good news. But ultimately, there’s not one simple macro factor to pay attention to… To really get what's going on, we need to look closely at how all the different parts of the world's economy connect. This is why I consider myself a macroeconomic trader — the global markets inform one another. Things like decisions by big banks, international trade, and overall trader sentiment all play a big role in what happens in the markets. Right now, the markets are in a weird place where the usual signals aren't as clear or reliable as they used to be. And when we’re less certain about market direction and sentiment, we should be trading less. CAUTION: There’s nothing wrong with sitting on the sidelines until your setups appear again! Closing Thoughts In short, the economy and the stock market are in a strange spot right now. Traders aren't reacting much to a strong GDP report or to big problems in markets like China and Hong Kong. This shows that we're in a unique time for the world's financial markets. The usual rules don't seem to apply, and this is because of the recent ups and downs in the market and bigger changes in the world economy. To understand what's happening, we need to look at all the different factors that affect how markets behave, especially in these unusual times. So, keep your macro vision sharp, and don’t overtrade when the market is stalling. And, as always… Stay Street Smart, Jeff Zananiri P.S. 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