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The S&P 500 exploded 3% higher Tuesday, adding to Monday’s huge 2.6% gains.
Economic headlines remain the same, which is to say awful. But after seven weeks of non-stop selling, a near-term bounce was inevitable.
As I often remind readers, the market loves symmetry and that means this rebound will be nearly as impressive as the preceding selloff. And boy has it gotten off to a banger of a start!
Unfortunately for bears, the rebound’s foundation is built on their corpses, with a short squeeze providing a majority of the lift over the last two days. But bears only have themselves to blame for their lost profits. As I wrote last week:
As always, no matter how overdone the selling has gotten, the market can always get even more oversold. But it is getting harder and harder to scratch out those last few points to the downside and when this pops, boy is it going to pop.
At the very least, we should be lightening up our short positions because greed never pays. But more than that, this thing is a tightly compressed spring poised to rip. Wait for that bounce to start and then jump aboard.
As I often remind readers, the biggest and fastest rallies occur during bear markets. And the last time I checked, we are still in a bear market.
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Bears ignored all of the warnings and they are paying the price today. And things will probably get worse for them before they get better because this rebound isn’t showing any signs of letting up.
As for those of us that are on the profitable side of the rebound, there is nothing for us to do except keep holding and lifting our stops, now spread around Tuesday’s opening levels.
This really isn’t that hard when we know what to pay attention to.
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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.
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