The S&P 500 slipped 0.8% Wednesday, giving back all of Tuesday’s gains and leaving us stuck under 4k resistance for the fourth session in a row.
As I’ve written previously, it is not a surprise to see the October rebound stall at prior resistance levels as the cynics inevitably claim the index is too high and on the verge of collapsing. But one of the first things experienced traders tell new traders is, “Never try to pick tops.” That’s because what looks like a top is almost never the top. And I have a strong suspicion that this week’s “top” is nothing but another pause on our way higher.
Everyone knows markets move in waves, but that never stops people from calling every down day the start of the next big selloff. As much as I’d love to see prices rally every single day, everyone knows that’s not possible. So why overreact when we get one of those inevitable red sessions?
At this point, I don’t see anything out of the ordinary about Wednesday’s losses and this week’s struggles with 4k resistance. In fact, this price action actually looks constructive because across several days of testing the weekly lows, every single time supply dried up and prices bounced. That’s a characteristic of a strong market, not a weak one.
If this rebound was as fragile and overbought as the critics claim, we would be crashing back to the lows, not stubbornly hanging out near multi-month highs. Follow the market’s lead and ignore the noise.
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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.