A market that refuses to go down will eventually go up

By Jani Ziedins | End of Day Analysis

Dec 06

Free After-Hours Analysis: 

The S&P 500 finished Monday nicely higher as the pattern of alternating up and down moves continue.

Omicron remains a major headline, but while this variant is definitely more transmissible, it doesn’t seem obviously more dangerous than previous strains. In fact, some initial indications suggest it could actually be more mild, especially for those that have been vaccinated.

In separate news, the Fed is still hinting it will scale back monetary stimulus next year. While everyone loves free money, an economy that can stand on its own is even better for stocks.

Despite all of the fearmongering, the index remains within 3% of all-time highs. As much as cynics ridicule this bull, owners are comfortable and continue confidently holding for higher prices.

While conventional wisdom warns us about complacent markets, this bull has been fat, dumb, and happy all year and it doesn’t look like this latest crop of headlines is changing anyone’s minds.

Headlines don’t need to be good for stocks to rally, only less bad than feared and so far none of the worst-case scenarios are playing out. As I often say, a market that refuses to go down will eventually go up.

While buying bounces sounds easy enough, the market is never easy and most bounces throw a few curveballs at us first. If trading was easy, everyone would be rich and we know that’s not the case.

Sometimes we get caught on the wrong side of these whipsaws, but that’s just the nature of the beast. If we can’t handle a little up and down, then we’re definitely in the wrong line of work.

But as long as we stick to our trading plan, these speedbumps are fairly easy to navigate. Remember, success in the market isn’t about individual trades, but the cumulative result when we put all of our trades together.

While riding these whipsaws is frustrating, the reward will be worth it when we find ourselves in the right spot at the right time when the market finally bounces.

Remember, start small, get in early, keep a nearby stop, only add to a trade that is working, and if we get stopped out, no big deal, wait for the next bounce and do it all over again.

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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.