Is it time to panic?

Free After-Hours Analysis: 

Traders hit the sell button Tuesday when an echo of last month’s bank crisis reverberated through the market and the S&P 500 tumbled -1.6%. And so continues the swinging pendulum of sentiment.

The thing about Tuesday’s banking headlines is these reports of massive outflows are old news. This isn’t what is happening now, but an autopsy of what occurred last month. If someone is freaking out over these headlines today, they are waaaaaaay late to the party.

We need new and unexpected headlines to break this market and as we learned last month, trouble at regional banks isn’t enough. If it was going to happen, it would have happened.

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The market loves to convince us we are wrong moments before proving us right. As paradoxical as it seems, Tuesday’s bloodbath could actually turn out to be very bullish if the market bounces over the next few days. That’s because this reflexive selling is purging the last of the dead weight and clearing the way for the next leg higher.

The key is we need to bounce. Without that bounce, the selling could feed on itself for a few more days and go further. But without new and meaningful headlines to convert confident bulls into fearful bears, the selling will stall, and this dip won’t turn into anything more than a routine step back on our way higher. At this point, 4,200 resistance is still very much on the table.

While I remain optimistic, this wave of selling demonstrates why it is better to be a little late than a lot early. 4,200 is still very much in the cards, but there are zero reasons to commit early and hold a dip under 4,100. Savvy traders don’t buy dips, they buy bounces. This is a small but critical distinction.

As I wrote in Monday night’s free blog post:

While Bulls and bears love to place their bets ahead of time, I like waiting for the move to start first. A nice bounce Tuesday will be the green light to give this trade a shot.

As it turned out, Tuesday’s bounce never arrived and I was left watching the bloodbath from the sidelines. Which wasn’t a bad place to be. In fact, Tuesday’s selling works to my advantage because it lets me get in at even lower prices when the inevitable bounce finally arrives.

Maybe we bounce Wednesday. Maybe it doesn’t happen until Thursday, Friday, or even next week. But a bounce is coming because it always does. But until then, the lower we go now, the better it is for me.

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