Why fools keep losing money in this very easy market

By Jani Ziedins | End of Day Analysis

Mar 27

Free After-Hours Analysis: 

The S&P 500 kicked off Monday morning with nice gains after nothing bad happened over the weekend. Unfortunately, that early push above 4k resistance turned back and the index gave up a big portion of those initial gains by the close.

As I’ve been saving for a while, anyone anticipating a big directional move is getting chewed up by these whipsaws. Friday’s violation of last week’s lows ended in a big bounce and Monday’s push to recent highs was turned back by 4k resistance.

Smart money is trading against these swings, not in their direction. As I wrote Friday afternoon:

Bears were right for a few minutes [Friday] morning, but if they held on much longer than that, they watched all of those profits go flying out the window. And no doubt it will be the bulls’ turn [this] week when we hit our head on 4k resistance yet again. This is the kind of market where if you are not taking profits, you will be taking losses a few hours later.

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Well, here we are Monday afternoon following a rejection by 4k resistance. If someone is surprised by these reversals, clearly they are not paying attention.

Savvy traders see the market for what it is, not what they want it to be. And that simple nuance is the difference between making money and losing money. Bulls and bears need to be right, I just want to make money and don’t care who wins. And that is making all the difference here.

As for what comes next, expect more of the same. Buy the bounce and sell the breakdown. But remember, we only make money when we sell our winners. If you are not taking profits when you have them, you will end up taking losses days, if not hours later.

Stay nimble and ignore everything coming out of bulls’ and bears’ mouths. This is a choppy trading range. Only fools are trading it like it is going somewhere.

If the index bounces above 4k resistance Tuesday or Wednesday, that is a buy signal. If the selling continues Tuesday, that is shortable. And no matter what happens, take profits early and often because if you don’t, the market will take everything back a few hours later and you will be left holding the bag.

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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.