The obvious mistake bulls and bears keep making

By Jani Ziedins | End of Day Analysis

Mar 23

Free After-Hours Analysis: 

Thursday’s +0.3% finishing print in the S&P 500 fails to convey what a wild ride we took through the session.

A huge opening rally erased all of Wednesday’s -1.7% slump as the whipsaw price action continues. But just when the bulls were the smuggest, demand dried up and the index gave back all of those early gains.

This wild price action shouldn’t surprise anyone. As I’ve been writing for a while, this is a back-and-forth market, not a directional one. Every bit of up is followed by a bit of down. As I warned readers Wednesday evening:

[I]f we are not taking profits early and often, we won’t have any profits left to take. This applies equally to both bulls and bears. This is not a directional market, this is a back-and-forth market. One day’s up turned into the next day’s down. Don’t get fooled into trading the breakout/breakdown, trade the reversal.

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This is the kind of market where if you are not locking in worthwhile profits, you are left taking losses a few hours later. It really is that simple. Greedy bulls and bears are getting killed while savvy and opportunistic traders are printing money.

This market is not breaking down and it is not breaking out, so stop trading like it is. The crowd is losing a ton of money. Lucky for us, their losses can turn into our gains.

Obviously, this pattern cannot last forever, but I don’t see any hints this price action is changing. Keep buying the dips and selling the rips until the market proves otherwise. Remember, lock in worthwhile profits early and often because if you don’t, the market will hand you a pile of losses a few hours later.

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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.