The S&P 500 added 1.3% Wednesday, and the index now finds itself at its highest since early December.
So much for Monday’s ugly intraday reversal. But that’s the way this goes sometimes. If this were easy, everyone would be rich.
The market frequently throws curveballs at us, and Monday was one of those days. Sometimes it has to convince us we are wrong moments before proving us right.
The key to surviving these whipsaws and false alarms is staying nimble and having a solid trading plan. Anyone winging this is getting eaten alive as they keep getting fooled into buying high and selling low.
But if we have a thoughtful trading plan that gets us in early and gets us out early, then not only are we surviving these whipsaws, we are thriving in this volatility.
As hard as it was to buy Tuesday’s rebound following such awful price action on Monday, that was the right call.
And a savvy trader was adding even more money Wednesday morning. Big money came back from Christmas vacation in a buying mood, and the smart money is following those whales.
Now that the index is well above our entry points, we can lift our stops, making this a low-risk trade where at worst, we get dumped out for breakeven.
If we’re right, we make money. If we’re wrong, we lose nothing. It is impossible to beat that risk/reward.
4k resistance and the 200dma are up next. These were stumbling blocks back in November and December. But at this point, the market is acting well and deserves the benefit of the doubt.
That means we keep riding this wave until it breaks down. Move stops up and see where this goes.