The S&P 500 finished Wednesday’s session up a modest 0.3%, but if you only looked at the finishing print, you’d miss everything the market was trying to tell us.
It’s not how you start, but how you finish that matters most. And while no one is getting excited by a 0.3% gain, the market started the session down 0.8% and finishing in the green is actually a noteworthy accomplishment.
The thing about Wednesday’s resilience is it mirrored Tuesday’s bounce back from the midday lows. Lucky for readers, everything I wrote in Tuesday evening’s blog post was fully on display during Wednesday’s session:
The reflexive selling Tuesday morning would have triggered a bigger follow-on wave of selling if this market was overbought and vulnerable. Instead, supply dried up as most equity owners shrugged and kept holding. That tells us the ground under our feet is far more solid than most people think.
Wednesday was strike two bears, adding more proof to the idea that this market wants to go up not down. A market that refuses to go down will eventually go up and it is only a matter of time before we are challenging 4,200 support again.
That said, we don’t want to get too excited because this market is still consolidating January’s gains under 4,200 resistance. As much as I’d love to see the index explode higher, it simply doesn’t have the energy to do that right now. Instead, expect this back and forth under 4,200 to continue.
No matter what the bulls and bears claim, this market is not going to explode higher and it is not going to crash lower. But that’s okay for the savvy and opportunistic trader. Buy the dip, sell the bounce, and repeat as many times as the market lets us.
But remember, if we are not collecting profits early and often, the market will take back all of those profits and turn our trade into a loser. Don’t let that happen to you.
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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.