The S&P 500 continues flirting with recent lows near 4,430 for the fifth day in a row.
To breakdown or not to breakdown, that is the question.
The thing about breakdowns is they typically fall hard and fast. Five days of grinding sideways isn’t hard and it isn’t fast. Does that mean the selloff is already over? The market sure is acting like it.
Lucky for us, we have a very clear line the sand near Tuesday’s lows that will tell us if and when this week’s bounce fails. Fall under this level and get ready for more selling. Hold above it and the rebound is alive and well. Above is buyable. Under is sellable. It doesn’t get any more straightforward than that.
But the market doesn’t like being easy, so the curveball might be a momentary violation of 4,435 support before bouncing back above. In that instance, the return above 4,435 is buyable and the rebound is back on.
Pundits are trying to convince us they know conclusively that this is either a bounce back to the highs or the start of a much lager selloff. Me, I don’t know and I really don’t care. I trade what the market gives me. If that means buying the bounce, then I buy the bounce. If it means shorting a bigger breakdown, then I short the bigger breakdown.
Following the market’s lead sure beats trying to win an argument when it isn’t listening.
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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.