The stock market experienced a second day of losses on Wednesday, dropping by 0.7% and wiping out gains from last week.
Warnings by market analysts went out late last week and on Tuesday, advising investors to take profits when possible, to safeguard earnings. Those who didn’t take these warnings seriously, would have seen their profits disappear. In this market, both bulls and bears face risks as they navigate the ups and downs of the last few weeks and months.
Debates over the debt ceiling continue, which has resulted in cooled demand for stocks within range of their 52-week-high. While most traders are aware that a deal will still be agreed upon, the process is typically slow and involves a significant amount of posturing. As a result, we should expect the headlines to become even more negative before a deal is reached.
Political impasse and the effect it can have on the market is well-known to experienced traders. While the markets have not experienced significant drops, current events have made it difficult for investors to move forward with any real confidence.
The bottom line? This kind of market is playing the short game, and if we’re not cashing in on profits, we are likely to experience losses in the coming days or weeks.
Despite the current state of the market, there is still room for hope and potential profit. Traders should anticipate choppy, sideways trading until further notice, and take advantage of buying opportunities as they arise. The real market bounce is coming, but it may take a few attempts before it occurs. Those shorting instead of buying this week, however, need to heed caution. They are at risk of repeating the mistake made by bulls earlier this week.
The current market also serves as a warning – it is essential, in this context, to take profits when they present themselves. Doing so could be the key to avoiding future losses.