Why stocks didn’t fall even further Tuesday

By Jani Ziedins | End of Day Analysis

Oct 11

Free After-Hours Analysis: 

The S&P 500 skidded Tuesday, making this the fifth losing session in a row and the index closed at fresh 2022 lows.

If that description is all you heard, you’d assume this was another -3% or -4% bloodbath given the way things have been going lately. But no, the best this fifth-loss-in-a-row could manage was -0.6%, barely more than half a percent.

But Tuesday’s limited selling isn’t a surprise for readers of this blog. As I wrote Monday evening:

With the latest inflation readings just days away on Thursday, that leaves the market in a holding pattern until then. Since Friday’s selloff put the market back into a half-empty mood, that likely means further weakness near recent lows, but don’t expect a crash until after the inflation data is released on Thursday. (If one is going to happen.)

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Knowing nothing much was going to come from Tuesday’s early violation of the lows made this a decent time to be locking in profits on our shorts positions, which is exactly what I was doing Tuesday. (We can’t make money until we sell our winners.)

I’m not one of those people pretending like I know what’s going to happen Thursday. As far as I’m concerned, the odds of stocks popping on moderating inflation are as good as stocks crashing if inflation remains stubbornly high.

Without an edge, I’m happy to watch this unfold from the sidelines and then jump aboard the resulting move after it starts happening. If that’s another crash lower, great, I’m putting my short positions back on. If stocks race higher, even better, I jump aboard that rally and let those profits come to me.

I’m agnostic and don’t care what happens as long as something happens. (That’s the trader in me talking. The human being in me is hoping for a quick resolution to this inflation/recession mess so it affects the fewest number of people possible.)

A big trade is around the corner, we just need to be patient and wait for it to come to us. Don’t let these meaningless, near-term gyrations throw you off. But once it gets here, don’t be afraid to grab hold because there will be lots of easy and fast profits to be had.

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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.