Friday morning, the jobs number came in weak.
And I mean ugly, with only 22,000 jobs added to the economy in August.
Payrolls missed. Revisions got slashed, marking the first labor market shrinkage since 2020. Unemployment ticked higher, from 4.2% to 4.3%.
Not the kind of thing that screams, “Buy stocks,” right?
Yet markets rallied. Treasury yields sank. And traders got excited.
If you’re scratching your head wondering why Wall Street cheers bad news … welcome to the club. It doesn’t make sense on the surface, but once you understand how the game is played, it starts to click.
This is where most people get it wrong.
They think the market moves on the actual data. It doesn’t.
It moves on the reaction to the data — and what that data implies about what’s coming next.
That’s why a weak jobs number can make stocks rip higher.
It tells traders one thing: The Fed might finally blink.
See, if the labor market is cracking, the Fed’s job gets trickier.
Inflation might still be sticky, but now unemployment is creeping up too. Fed Chair Powell doesn’t want to be the guy who raises rates straight into a slowdown.
So what does the market do?
It starts pricing in the idea that rate hikes are over … maybe even that cuts are on the table sooner than expected.
That sends Treasury yields lower, which makes equities, especially growth stocks, more attractive.
In plain English: The worse the jobs data, the better the odds the Fed takes their foot off the brake. And that’s what moved markets on Friday.
Now here’s the real question: What do you do with this?
Let me walk you through my thought process.
Who’s Ripe for a Bounce
When yields drop like this, I immediately look toward the parts of the market that got beat up the worst during the rate hike cycle and ask, “Who just got a get-out-of-jail card?”
Growth names with heavy debt loads? Check.
Small caps? Check.
High-beta tech? Absolutely.
These are the areas that tend to snap back first when rates start to fall.
I’m not saying go load the boat. That’s not how I trade; I don’t “bet” on anything.
But I do start watching for confirmation: price action, volume, sector rotation.
I want to see real buyers step in.
Because when the shift starts, it usually happens fast — and if you’re sitting around waiting for three more pieces of evidence, you’ve missed the trade.
Positioning Matters
Last week, I was already keeping an eye on a few growth names that had been basing out. When Friday’s data hit and yields dropped, they started moving.
I’ll be watching those names closely this week — not chasing, just stalking.
Another angle I’ll be watching is implied volatility.
After big macro surprises, options premiums can jump, and that opens the door for spreads.
If I like a bullish move but the options are jacked up in price, I’ll structure a bull call spread to limit exposure.
And let’s be clear: I’m not married to a direction. If we gap up Monday and stall, I’ll gladly fade the move with puts.
The market doesn’t care about your opinion, only your positioning.
This kind of market gives you chances, but only if you’re watching the right things.
Forget the headlines. Don’t worry about whether the jobs data was “good” or “bad.”
That stuff’s noise.
You want to focus on how the market reacts — because that’s what gives you an edge as an options trader.
Friday handed us a clue. This week is your chance to act on it.
Stay street smart,
Jeff Zananiri
P.S. Want to see real trades, in real time? Tonight at 8 p.m. ET, Danny Phee is walking through exactly how he’s attacking this market — what he’s trading, why he’s trading it, and how he’s staying ahead of the crowd.
Show up, dial in, and see how the pros get it done.
*Past performance does not indicate future results
