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When A Loss Is Bullish

By Jani ZiedinsStock MarketsOct 06, 2022 03:31AM ET
www.investing.com/analysis/when-a-loss-is-bullish-200630708
When A Loss Is Bullish
By Jani Ziedins   |  Oct 06, 2022 03:31AM ET
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While yesterday’s session S&P 500 a seemingly trivial -0.2%, that modest decline disguised a massively volatile session with the index gapping -1% lower at the open and early selling pushing the index all the way down to -1.8%. But just before all hope was lost, a one-way wave of buying erased nearly all of those losses by the close.

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

Following the biggest two-day gain in years, it wasn’t a surprise to see some profit-taking and bears reentering their short positions Wednesday morning. More important than the fairly vanilla step back from Tuesday’s close was how the market reacted to those early losses. Was this week’s rebound built on bedrock, or a foundation of sand? Well, it didn’t take long to find out.

Nearly as quickly as that wave of selling arrived, it vanished and the index spent the rest of the session rallying back to breakeven. That’s not the behavior you expect from a fragile and vulnerable rebound. If this really was a foundation built on sand, Wednesday morning’s selloff was more than enough to send us tumbling back to the lows.

As difficult as it is to keep holding after a 5% surge in two days, especially given the complete lack of improvement in economic headlines, the market is clearly telling us it wants to go higher, not lower. If we were going to crash, Wednesday morning’s bloodbath was the perfect invitation. The fact we escaped with hardly a scratch is all the proof I need to keep holding my long positions for higher prices.

When A Loss Is Bullish
 

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When A Loss Is Bullish

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Comments (3)
إسماعيل الشوامرة
إسماعيل الشوامرة Oct 07, 2022 4:56AM ET
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Chris Dollar
Chris Dollar Oct 06, 2022 6:09AM ET
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Lol, another comment with half-life of a few hours only.
John Berry
John Berry Oct 06, 2022 5:08AM ET
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BINGO. Glad someone gets it.
 
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