Market Extends Winning Streak but Impending Top Looms
2023.11.03 03:25
The popped another 1.9% Thursday, making this four up-days in a row.
S&P 500 Index-Daily Chart
The Fed did exactly what everyone expected on Wednesday, meaning the Fed’s didn’t change anyone’s mind.
Those that were bearish on Tuesday were still bearish on Thursday. What changed is the market ran out of impulsive sellers last Friday.
The resulting oversold condition triggered this capitulation and 200-point rebound over four short trading sessions.
Easy come, easy go, as my dad loved to remind me when I was young.
There are two ways to trade: starting like a fool and ending like a genius, or starting like a genius and ending like a fool.
Without a doubt, I looked foolish last week when I told readers I was getting ready to buy last week’s blood bath as soon as it bounced. Here’s what I wrote in last Wednesday’s (Oct 25th):
Remember, stocks top when everything looks great, and they bottom when everything looks terrible. By that measure, this is definitely a good time to be bottom-fishing.
To be clear, I am 100% opposed to buying on the way down. But every time we bounce, you will find me jumping in.
Start small, get in early, keep a nearby stop, and only add to a position that’s working. Follow those simple rules, and bottom-fishing is extremely profitable.
There were a lot of greedy bears gleefully criticizing my optimism last week. And without a doubt, they were right initially. But here we are a few days later, and the market has turned all of their profits into big piles of losses.
Luckily, I have no problem playing the fool in front of the crowd if it lets me rack up a pile of 3x ETF profits like this a handful of sessions later.
Of course, I’m not going to let myself fall into the same trap greedy bears were caught by. I am fully cognizant that markets move in waves, and one week’s genius becomes the next week’s fool.
Thursday’s nearly 2% up day was the biggest gain of this rebound, and these things usually accelerate right before the end.
To be clear, I’m not calling this a top, but with a big pile of profits in hand, it would be criminal to allow hubris to turn these profits into losses.
Remember, we only make money when we sell our best trades. And at this point, nearly 200 points in a 3x ETF is good enough for me. At this point, the rewards ahead of us are far smaller than the risks underneath us.
But now that I’m out of the market and sitting on a huge pile of profits, the very first thing I do is start looking for that next opportunity to get back in.
Maybe that is buying the next dip and bounce. Maybe it is buying a huge short squeeze that powers through the 50dma. No matter what it is, I will be ready for it.
