Is it time to panic?

By Jani Ziedins | End of Day Analysis

Feb 09

Free After-Hours Analysis: 

It was another two-faced session for the S&P 500 as nice opening gains turned into big closing losses.

Luckily, this didn’t surprise readers of this blog. As I’ve been saying for a while, this is a choppy market and not a directional one. That means taking profits early and often because if we wait a few hours too long, those profits escape and turn into losses.

As I wrote Wednesday evening:

Long gone are the days of big, multi-day moves. Instead, we are stuck with this daily chop. But that’s not a problem because it can be just as profitable if we know how to trade it. Keep taking profits early and often because today’s winning trade will turn into tomorrow’s loser.

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Well, it seems I underestimated this market because instead of waiting a day between swings, we are now getting big changes in direction within a single session.

But as I said previously, this isn’t a problem for nimble traders that are willing to lock in profits when they have them and then get ready to go in the other direction.

It is the bulls and bears getting chewed up by this back-and-forth price action because instead of taking profits when the market moves in their direction, they start bragging about how smart they are and are doubling down. Bulls were doing it yesterday. Today it’s the bears’ turn.

As bad as Thursday’s price action looks, there weren’t any significant headlines driving this selling. As entrenched as bulls and bears have gotten over recent months, it will take big and undeniable changes in the fundamentals to get people to change their outlook. We didn’t get anything remotely close to that Thursday, meaning there is no real meat to Thursday’s selling, meaning it will most likely end in another reversal on Friday or early next week.

At this stage, only fools are expecting these wobbles to trigger the next big breakout or breakdown. The rest of realize stocks spend most of the time going up and down for no real reason at all.

Without a significant fundamental driver behind Thursday’s selling means I’m looking to buy the next bounce. Maybe it arrives Friday morning. Maybe Friday afternoon, or even early next week. But a bounce is coming because it always does.

Sell when other people are confident and buy when they are scared. Repeat as many times as the market lets us.

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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.