Has the market’s mood finally soured and what that means for the rest of the year. Plus a Bitcoin trade.

By Jani Ziedins | End of Day Analysis

Sep 20

Free After-Hours Analysis:

Monday was the ugliest session in a long while for the S&P 500 and only a late bounce off the midday lows saved it from being the worst day of the year.

Financial journalists blame this weakness on real estate problems coming out of China. But the thing to remember about journalists is if they could trade, they would be traders, not journalists…

While this property bubble story out of China sounds plausible, it’s been years since U.S. markets cared about what’s going on inside China’s economy and nothing changed this weekend.

Readers of this blog know the real answer is this “unstoppable bull” was setting up to run into some headwinds this fall. We didn’t know what “the problem” was going to be, but we knew it was coming. Markets move in waves and if it wasn’t China, it would have been something else. It was simply time.

Now that we got that out of the way, it is time to figure out what comes next. All of the other dips this year bounced within days, if not hours. Should we expect the same thing this time? Nope, not at all.

This time is different because it is the first dip that truly sent fear and indecision racing through the crowd. Previously every dip was met with a shrug and prices bounced within hours due to the lack of follow-on selling. That confidence is long gone and everyone is now wondering if this is “the big one”.

As for what comes next, it takes a while for emotional selloffs to work their way through the system and we shouldn’t expect this one to bounce back to the highs anytime soon. In fact, there is a good chance we’ve seen our last record high this year.

The market’s mood has clearly changed and that means the half-full outlook has been replaced by nervousness and second-guessing. Fear of the other shoe dropping will keep traders on edge for weeks, if not months.

Monday’s intraday lows near 4,300 set a new benchmark to keep an eye on. Above this level and an adventurous trader can buy a near-term bounce for a quick buck. But take profits early and often because we will retest 4,300 again over the next week or two, if not later this week.

Expect a few violations along the way, but anytime we get back above 4,300, that qualifies as a buyable bounce. Maybe it doesn’t amount to much, but if we start small, get in early, the risk is almost zero the potential reward is quite large.

And if this thing keeps falling, even better. The lower prices go, the better the discounts get. (You are in cash right?)

Bitcoin continues failing as a hedge against volatility in the equity market. This cryptocurrency fell along with everything else today and no one was safe.

Nimble traders had their trailing stops get them out closer to $50k and now these savvy opportunists are eager to take advantage of these discounts. A bounce off of $40k is buyable, but all bets are off if this falls under $40k. Plan your next trade accordingly.

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, 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 children.