Quadwitching and Economic Reports: Which Ones to Follow? | Podcast Episode #161

0:07
Hey, I’m Ryan Mallory, and this is my swing trading the stock market podcast. I’m here to teach you how to trade in a complex, ever changing world of finance. Learn what it means to trade profitably and consistently, managing risk, avoiding the pitfalls of trading, and most importantly, to let those winners run wild.

0:25
You can succeed at the stock market, and I’m ready to show you how. Hey everybody, this is Ryan Mallory with Swing Trading the stock market. We got a good episode. We’re gonna talk about quad witching and the economic reports. Which ones matter, which ones I follow, and how you should trade them. I’m going to talk about all that and more in this podcast.

0:40
So I got an email from a person that asked to be called Gitmo Bear. I’m not sure if that’s like a reference to a TV show or something in the past. I don’t know, but I’m just gonna call him Gitmo for short. Gitmo writes, “Hey Ryan, love your podcast. I listen every week and I’m going back through the previous ones too.”

0:57
He says, “If I can be included in your next one, that would be amazing. You can call me Gitmober.” Well, I did. “I’d love to hear your thoughts about market cycles, AKA blood in the streets after quad witching.”

1:13
He says, “If you look at the S&P 500, Dow, Nasdaq, and the Russell 2000, you usually see a few rough days and then we rally. What dates do you circle on your calendar? I circle job reports, CPI data, and anytime the Fed is speaking. Plus QW days, quad witching, which happens four times a year. Are there any more dates you recommend watching?” Sincerely, Gitmo Bet.

1:35
All right, for the bourbon of choice. Right before doing this, I was at an ABC liquor store and I picked up Wild Turkey Rare Breed Barrel Proof. I’ve been hearing a lot of people talk about it being a good bourbon. So I had to see for myself.

1:51
It’s a strong one. It’s 116.8 proof and 58.4% alcohol. I tried it and had to back off a little bit. It was unbearable. It’s so strong because it’s straight out of the barrel, uncut and not diluted. It was hot, spicy, and happening, man.

2:08
I had to put a little bit of water in it. Just a splash made a huge difference. It didn’t dilute it much, but I could taste a lot more flavor. By itself, it was too hot, but with a little water, it’s right. You can smell the vanilla, and when I tasted it, I could definitely taste the cocoa in the finish.

2:24
Very nice, solid bourbon. You don’t need much water, maybe even a small ice cube. For the score, I’ll give it a 7.2. It’s a good, solid barrel proof bourbon, but it doesn’t stand out above the rest. I’d buy it again, but I’m not running out for it.

2:40
All right, let’s see what we can do to help Gitmo here. First off, quad witching. For those who don’t know, I don’t see it as that big of a deal. A lot of people talk about it. I got an email from a friend asking what I’ll do about quad witching this Friday.

2:58
I told him, “I don’t have any plans.” I don’t pay much attention to it because I don’t think it’s that meaningful of an event. Yes, there’s usually higher volume, but that’s just the option contracts expiring in the money and being offset with shares.

3:14
A lot of people think volatility goes crazy on these days, but it really doesn’t. As swing traders of equities, I just buy stock, and I don’t care much about quad witching. Even if I traded options, I wouldn’t care much.

3:29
Maybe if I had options expiring that day, but otherwise it doesn’t matter. Some people try to make big moves to get their calls in the money, but overall, it’s a non-event for most retail traders.

3:45
Yeah, the week that follows quad witching tends to lean a little bearish. This past week was slightly bearish. The S&P 500 finished higher, but the Nasdaq 100 and the Russell both finished down. It was a mixed week overall, not exactly bullish enthusiasm.

4:00
And it’s not just quad witching. You have triple witching, monthly expirations, and weekly expirations too. So don’t let those dates affect your trading. I don’t even notice when options expire most of the time because it just doesn’t matter.

4:18
If you try to short the market after every quad witching because you think it’s always bearish, you’ll be wrong as often as you’re right. The market might only dip slightly or not at all. The Russell might be weak while the S&P is strong. It’s unpredictable.

4:34
It’s not something I pay attention to or trade around. For swing traders, quad witching and option expirations are overblown. If you trade options expiring that day, sure, you might see some volatility, but for most traders, it’s a big nothing.

5:06
Now, I like this next part of the email even more because I think that Gitmo here is really intrigued by what news events really impact the market. And it depends. It’s kind of like a classic economist response. Even though I studied economics in college, I don’t consider myself an economist. I pretty much remember supply and demand. I don’t remember all those other equations that came with it, but it really depends on the season the market is in.

5:27
Right now, the Federal Reserve’s FOMC statements move the market a little. You’ll see some volatility, but not much. I’ve seen days where the statement comes out, and you’d never even know it because the market barely reacts. Most of the time, there’s only a small move.

5:45
It really depends on what traders expect. At the moment, nobody thinks the Fed will raise interest rates anytime soon. In fact, they’ve already said they’re not even thinking about raising them until 2023 or so. So there’s no real anxiety surrounding the FOMC right now.

6:06
What I’ve noticed in recent years, especially with Janet Yellen and Jerome Powell, is that they forecast their moves way in advance. They don’t surprise the market anymore. You don’t see them releasing a statement at 2 p.m. that shocks everyone with a surprise rate hike.

6:21
They don’t mind surprising to the downside, though, because that usually helps stocks. Think back to the COVID sell-off in February and March. It seemed like every Sunday night they were cutting rates or announcing new programs. They did it to get ahead of the futures market and try to spark a rally right out of the gate.

6:38
Sometimes it worked, sometimes it didn’t. But when the sell-off finally reached its end, you could see those actions really take hold. They’d come out Sunday night saying, “We’re cutting rates to zero,” and while it caught everyone off guard, it did eventually help stabilize things.

6:55
When it comes to raising rates, though, they always prepare the market ahead of time. They don’t want to shock investors. So you don’t have to worry too much about sudden moves with this current Fed. That could change with future chairmen, but for now, they’re pretty predictable.

7:11
Then there are all these press conferences. It used to be that they’d just release the statement and that was it. But Janet Yellen started doing press conferences afterward, and now Jerome Powell does them every single time.

7:26
If you don’t know, the FOMC stands for Federal Open Market Committee. They’re the group that sets interest rates. It’s the Fed chair plus a bunch of governors. They vote, but honestly, they usually just go along with whatever the chair wants.

7:44
Yellen would only do her press conferences every other meeting. So you kind of knew those were the ones to watch. But now Powell speaks after every single one. I swear he just likes to hear himself talk. I really don’t like any of them if I’m being honest. They love being in front of the cameras.

8:02
It feels like every year they talk more and more. It’s like they want to control the markets with their words. I’m not saying the market is rigged, but their constant talking definitely moves prices. They seem to enjoy that power.

8:21
I wish they’d just talk less. My dad used to say every time Alan Greenspan opened his mouth, he lost money. Looking back, Greenspan might have been the best of them. He wasn’t perfect, but he actually tried to manage rates based on the health of the economy, not headlines.

8:36
So when it comes to the Fed, it really depends on the environment. If the market expects rate hikes or cuts, the FOMC meetings will matter more. If not, they barely move things.

8:50
And if the market starts tanking 20 or 30 percent, you can bet they’ll roll out some new program to prop it up. That’s why shorting for long stretches is so tough. Even when rates are already low, the Fed always finds another way to spark a rally.

9:09
It’s also hard to trade around Fed speeches. They talk every day now. There’s always a governor or Powell himself saying something. You can’t plan trades around that because it never stops.

9:26
Now, about the economic reports. You have CPI and PPI for inflation. You have jobless claims and GDP numbers too. Those become more important when inflation is high or growth is slowing.

9:45
When volatility rises, traders pay more attention to them. Right now, volatility is pretty low, so these reports don’t cause massive moves like they used to. But in a shaky market, they can definitely move prices.

10:02
If I had to rank them, the Fed statement and press conference come first. Then employment numbers, GDP, weekly jobless claims, CPI, and PPI. They all matter, but their impact changes depending on what phase the market is in.

10:18
Do I trade around them? Not really. I trade the charts. There’s always something happening, and if you wait for every report to pass, you’ll never take a trade. As a swing trader, you often have to hold through those events.

10:35
Before an FOMC statement, though, I usually avoid adding new positions. Especially bank stocks. Every time I’ve done that in the past, I’ve regretted it. So now I skip the banks on Fed days.

10:52
And what about the economic reports? You have CPI, you have PPI. Those become much more important when we’re worried about inflation or about an economic slowdown. They can signal whether growth is picking up or stalling. You also have jobless claims, and that becomes a big deal when volatility increases.

11:07
Right now, volatility is low compared to where it’s been over the past year. So while these reports still matter, they don’t move the market as much as they do during wild swings. Their importance really depends on the kind of market we’re in.

11:25
If I had to tell you which ones are most important overall, it would start with the Federal Reserve’s FOMC statement and the press conference afterward. Then the employment numbers, GDP, weekly jobless claims, and finally CPI and PPI. They all play a role, but their impact changes depending on the market cycle.

11:44
Do I trade around them? No. I focus on the charts. There’s always something going on in the economy, so if you try to avoid every report, you’ll never trade. As a swing trader, you have to hold through some of these events and trust your risk management.

11:59
Before a big Fed statement, though, I usually avoid adding new positions, especially bank stocks. Every time I’ve bought into banks right before an FOMC announcement, I’ve regretted it. So now, I just skip them on those days.

12:20
Also, I want to tell you guys about Swing Trading the Stock Market. It’s my Patreon account that goes along with this podcast. It’s really cool. You get my market research every day, including bullish and bearish watch lists, daily trade setups, and the charts I like.

12:38
You’ll also get updates on the big FAANG stocks like Facebook, Apple, Amazon, Netflix, Google, Tesla, and Microsoft. Plus I cover the Russell 2000, the S&P 500, and the Nasdaq 100 multiple times a week.

12:58
So check that out at swingtradingthestockmarket.com. It supports this podcast and helps it grow, and you’ll get a ton of value in return. And please keep sending me your emails like Gitmo Bear did here.

13:15
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13:34
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13:52
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14:12
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