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If This Market Doesn’t Make Sense, Start By Reading This

By Jani ZiedinsStock MarketsSep 24, 2021 01:59AM ET
www.investing.com/analysis/if-this-market-doesnt-make-sense-start-by-reading-this-200602945
If This Market Doesn’t Make Sense, Start By Reading This
By Jani Ziedins   |  Sep 24, 2021 01:59AM ET
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One day down and three days back up. As poorly as the week started, amazingly enough, by Thursday the S&P 500 already turned green for the week.

S&P 500 Index Daily Chart
S&P 500 Index Daily Chart

Bears did their best to break this market, yet most owners showed their stubborn resolve and kept holding. Real estate bubbles in China? Fed tapers? None of it seems to matter to this bull market. But should anyone be surprised? This bull market was born in the depths of a global health pandemic. Of course it doesn’t care about these “little” things.

While I bought the dip following Monday’s late bounce and added more on Tuesday, I’m not convinced this bounce is the real deal. False bottoms also look like the real deal moments before the bottom falls out.

Lucky for those of us that got in early, we already moved our stops up to our purchase price and are now sitting on low-risk trades. Compare that to the person who abandoned ship on Monday and is now riddled with regret and indecision. One trader is coasting on easy street. The other is lying awake at night, stressing over what they should do next. Which trader would you rather be?

As I say over and over again, every time we sell, always, always, always have a plan to get back in. Dips are almost always false alarms and we need to have a plan to deal with them so we don’t get left behind when the market bounces.

Start small, get in early, keep a nearby stop, and only add to a trade that is working. Follow those simple rules and dips like this won’t bother you either. In fact, you will actually look forward to them because they are some of the easiest and fastest profit opportunities we get.

But now that the good dip-buying opportunity is behind us, now it’s time to figure out what to do next.

As I said, I’m not convinced this bounce is the real bounce. Lucky for me, just because I bought the bounce doesn’t mean I’m married to it. My stops are at or above my reentry points, but even more important, I’m focused on SPX 4,400. Hold above that level and the rebound is alive and well. Fall under it and we need to move to a defensive posture, which means scaling back open positions. And at this point, there is zero excuses to stick with a trade if the index falls under 4,350.

Remember, the best traders move proactively, not reactively. Have a plan ready and you will never get stuck on the wrong side of the market.

If This Market Doesn’t Make Sense, Start By Reading This
 

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If This Market Doesn’t Make Sense, Start By Reading This

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Comments (2)
Dimitrios Menounos
Dimitrios Menounos Sep 24, 2021 3:18AM ET
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Bears did break the market. Look at your chart again. Now we are testing resistance at 4470.
Andrew Bevan
Andrew Bevan Sep 24, 2021 2:59AM ET
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SP500 appears to have made a .618 retracement of the entire drop, which potentially labels it as a wave-b in an a,b,c correction. Thank you for throwing the regular bucket of water our way, that keeps our senses on alert.
 
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