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Stocks Bounce After All Hope Is Gone

By Jani ZiedinsStock MarketsSep 29, 2022 03:20AM ET
www.investing.com/analysis/stocks-bounce-after-all-hope-is-gone-200630423
Stocks Bounce After All Hope Is Gone
By Jani Ziedins   |  Sep 29, 2022 03:20AM ET
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The S&P 500 popped 2% Wednesday, snapping a six-day losing streak.

SP 500 Index Daily Chart
SP 500 Index Daily Chart

Even in this overwhelmingly bearish environment, seven down days was a little too much and a bounce was inevitable. But this isn’t a surprise for readers of this blog. As I wrote Tuesday:

When the market doesn’t do what it is supposed to do, in this case, devolving into a panicked dash for the exits, we have to sit up and take notice. As bad as things feel near the lows, maybe we really are finally running out of fearful sellers and are on the verge of bouncing on the resulting lack of supply.

Markets go up and markets go down, that’s what they do. After a month and a half of falling, we are due for some up. How much up is anyone’s guess and we won’t know until after it is all over, but in the meantime, Wednesday was the start of the buyable bounce we’ve been waiting for and the earlier we jump aboard these bounces, the less risky they become.

Economic data has been mostly stable even if coming on the disappointing side of what some investors were hoping for. The lack of meaningful fundamental changes means this remains a sentiment-driven trade and as quickly as sentiment sours, it can bounce back once stocks stop falling.

While Wednesday might not be the real bounce, by starting small and getting in early, we quickly build up a profit cushion to protect our backside. By Wednesday afternoon, we savvy traders were already adding more and nudging their trailing stops closer to their entry points. While not a free trade yet, it is looking pretty good.

Odds are good this bounce will fizzle and we will get to do this all over again in a few days, but since I have no way of knowing if the first, second, or third bounce attempt will turn into the real one, the only thing I can do is buy all of them.

Start small, get in early, keep a nearby stop, and only add to a trade that is working and our risks are actually quite low. If this doesn’t work, no big deal, I pull the plug and try again next time., but so far so good.

Stocks Bounce After All Hope Is Gone
 

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Stocks Bounce After All Hope Is Gone

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Comments (4)
Jeff Stuart
Jeff Stuart Sep 29, 2022 9:07AM ET
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ever considered short covering?
Jack Chapple
Jack Chapple Sep 29, 2022 7:20AM ET
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This article seems to assume traders only go long. The whole tone of it is about going long. Smart traders go long or short and are indifferent.
martin penny
martin penny Sep 29, 2022 4:04AM ET
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can anyone be Analist here? what is the requirement? I want to write my own story, I want to be famous :-D
Harrsha Suri
Harrsha Suri Sep 29, 2022 3:36AM ET
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Futures are dropping hard pushing all back to where it was a dat earlier….just a DXY run technical rally yday it seems
 
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