Why smart money is sitting on their hands

By Jani Ziedins | End of Day Analysis

Dec 05

Free After-Hours Analysis:

The S&P 500 finished Tuesday’s session essentially flat as Monday’s wave of selling turned into a lot of nothing.

As I wrote Monday evening, the market is consolidating November’s gains under 4,600 resistance. This makes recent price action meaningless at best, and outright deceptive at worst:

Far and away, the hardest thing to do in the market is to not trade. We have opinions, and the market is always doing something, but at this stage, every trading signal fizzles and reverses hours later. Just ask all of the bulls that bought Friday’s strength, only to watch those profits turn into losses Monday morning.

This is a consolidating market, meaning we can’t read anything into these intraday gyrations. Something will happen, but this isn’t it. Keep waiting and watching.

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This market is an equal opportunity humiliator, zinging both the bulls and the bears. Optimists who bought Friday’s pop are sitting on losses, and now we can add cynics who aggressively sold Tuesday’s poor open. More interesting trading opportunities are coming, but these are not them.

At this point, it is a tossup between stalling under 4,600 resistance or resting before the next leg is higher. This remains a sentiment trade, meaning anything is possible. The best we can do is wait for the market to reveal its intentions. Until then, smart money is sitting on their hands.

I’d love to be making money right now, but it’s been a fantastic year of trading, and there is no reason to force a bad trade here for nothing more than the impulsive need to be trading. Better opportunities are coming. We just have to be patient.

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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.