Unsurprisingly, the S&P 500’s choppy behavior continued on Wednesday as Tuesday’s midday slump reversed and turned into the highest close in nearly a month. A similar misleading signal came out of last week’s big -1.6% retreat that turned into this week’s big gain.
As I’ve been saying for a while, anyone trading in the direction of these breakouts/breakdowns is getting chewed up by the inevitable reversal a handful of hours later.
Savvy traders are coming to this market as opportunists, not bulls or bears. Buy (or short) the reversal and take profits quickly because anyone bragging about their profits is watching those turn into losses a day or two later.
As soon as you feel good about a position, that is a clear sign it is time to get out while the getting is still good.
No doubt the market can rally for another day or two after finally clearing 4k resistance, but Thursday and Friday will be the time to take profits, not chase prices higher.
Until further notice, this is a choppy market. That means taking profits when you have them because if you don’t, you will be taking losses a few days later.
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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.