The S&P 500 tumbled -1.2% on Friday on relatively benign headlines.
China delivered positive economic news, while the UAW targeted strikes against The Big Three automakers. Although prolonged UAW strikes could impact the US economy, The Big Three stocks actually rose during the trading session. If informed investors are not worried, then there is no need for the rest of the market to be concerned.
Friday’s decline was simply part of the normal fluctuations that occur when an index consolidates gains. Just like breathing, stocks go up and down. There is no need to interpret Friday’s dip as anything more than that.
Thankfully, none of this came as a surprise to readers. I previously stated:
These ups and downs are routine market sentiment gyrations. Since the recent selling was not driven by significant, unexpected news, it won’t have a lasting impact and we are approaching the bottom.
This means we should secure our profits from shorting the 3x ETF and prepare to buy during the next bounce. We may need to test the 4,400 support level a couple more times before a strong rebound, but taking profits a bit early ensures we are in the right position to seize the next trading opportunity, which is likely buying the bounce on Friday or early next week.
Interestingly, I could copy and paste last week’s analysis into Friday’s analysis because nothing has changed.
Looking ahead, expect more of the same. We are currently trading within the range of 4,400 support and 4,600 resistance. Unless something more significant occurs, we should anticipate continued sideways movement.
For trading purposes, this means capturing these waves and taking profits quickly and frequently. Holding positions for one or two days too long can result in lost profits.
Now is not the time to anticipate major directional moves. Stubborn bulls and bears will continue to suffer losses. Instead, the rest of us can steadily extract profits from the market, even if they may seem small. However, when using a 3x ETF, these trades can lead to significant gains, especially over a few days of work.