The S&P 500 skidded for a second session on Wednesday, giving up -0.7% and erasing aast week’s gains.
As I warned readers late last week and again on Tuesday:
If you are not taking profits when you have them, you won’t have profits left to take.
Last week’s buyers who failed to heed this warning watched all those profits slip between their fingers. Greed doesn’t pay in this market, and it has been zinging both bulls and bears over the last several weeks and months.
The debt ceiling bickering continues, and that is enough to cool demand for stocks near 52-week highs. As I’ve written before, the debt deal will still get done because the consequences of it not happening are too great.
But as is usual, a deal won’t be stuck until the final hour, and we should expect the headlines to get even uglier before then.
This stubborn standoff is SOP for partisan politics. And most traders know this, that’s why stocks are not significantly lower. But at the same time, this background noise is enough to keep investors from enthusiastically pushing stocks even higher.
As for what comes next, expect the choppy, sideways trade to continue. We’re not going anywhere, but that won’t stop impulsive traders from jumping from one side of the boat to the other.
Until further notice, we keep trading against these swings. That means this week’s swoon is a buying opportunity.
Sometimes it takes a few bounce attempts before the real one comes along, but that bounce is coming. And just like how bulls got stung this week, bears pressing their shorts this week are making the same mistake.
This is the kind of market where if we’re not taking profits, we will take losses a few days later.