Jul 09

End of Day Update:

It was another frustrating day for the S&P500 as early strength faded into the close. We opened 1% higher following a monstrous rebound in the Chinese stock market. But rather than embrace the strength, nervous and regretful owners quickly jumped on the opportunity to sell higher prices. While we didn’t dip under Wednesday’s lows, we came darn close.

Shortly after our markets closed, all of Thursday’s price-action became irrelevant when Greece finally produced a palatable proposal that includes most of the austerity measures European leaders demanded. By itself that was enough to push index futures up three-quarters of a percent. But then the news got even better as China kicked off Friday’s trade with another gangbusters open. That nudged our futures above one percent.

Futures are often misleading and plenty of glitches can occur in China and Greece while the Western Hemisphere sleeps. But for the moment, the situation in China and Europe are looking less bad than was feared in recent days. This is a great example of why we should trade against the herd. Sell when people are confident like they were two weeks ago, and buy when they are fearful like they were today. It is against our natural instinct to go against the crowd, but there is a big difference between the skills that allowed us to thrive in the wild and what it takes to be successful in the markets.

Barring an overnight calamity in the Eastern Hemisphere, we should have another nice open Friday morning. Hopefully it sticks this time. But if sellers take over again, that is not a good sign and it tells us the bottom is not in yet. That doesn’t mean we need to join the panicked selling, but at least be prepared for a little more volatility.

Jani

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and writer who has successfully traded stocks and options for more than a decade. He earned a B.S. in Mechanical Engineering from the Colorado School of Mines and an MBA and M.S. Marketing from the University of Colorado Denver. His prior professional experience includes manufacturing engineering at Fortune 500 companies, structural engineering, small business consultant, collegiate instructor, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two young children.

Motu July 10, 2015

Absolutely correct with this point, Jani:

This is a great example of why we should trade against the herd. Sell when people are confident like they were two weeks ago, and buy when they are fearful like they were today. It is against our natural instinct to go against the crowd, but there is a big difference between the skills that allowed us to thrive in the wild and what it takes to be successful in the markets.

I might even print it out and put it on a t-shirt 🙂

Cheers, Motu

    Jani Ziedins July 10, 2015

    Thanks!

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