Anticipating Bottoms Can be a Dangerous Game

Andrew Nyquist

stock market, stock chart, technical analysis, investingYes, it feels good to say “Danger is my middle name,” but when the financial markets move into correction mode, participants are best to step aside and wait for a setup to emerge; gaming or anticipating bottoms is a dangerous game.

Many pundits and analysts alike have been calling for an elusive bottom, or support area, for the past week.  Following their recommendations would have led to at best, second guessing yourself and messing up your psychology mojo, and at worst, getting your head ripped off.  If you are inclined to participate, look for stocks that have good setups – stocks that are above recent lows and showing relative strength.  And set stops to limit your losses.

For those that are just plain concerned with the current status of the market, see the daily chart of the S&P 500 below (proxy SPDR S&P 500: SPY).  As I previously wrote, the market is in a monthly window of weakness and won’t exit for another month.   This doesn’t mean that it has to go lower, just that rallies have been sold during this time.  The bulls are holding out hope that the market finds support in and around here and provides a bounce and successful retest that holds.  Any bounce should initially be held in check by the 1262-1274 (and rising) resistance band.

Be careful out there.  Happy investing.

 

Previously published as a blog by Minyanville.

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