S&P 500: Why Tuesday’s Retreat Wasn’t a Surprise
US500
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Well, that didn’t take long. Friday’s break above 5,100 is already history, as the S&P 500 rally stalled and retreated 1% on Tuesday.
S&P 500 Index-Daily Chart
Easy come, easy go. As I told readers previously, I bought Friday’s rally above 5,100, not because I thought stocks were going to take off, but because I could enter that trade in a low-risk way:
Well, as luck would have it, I got stopped out early Tuesday morning for breakeven, and I watched the rest of the day’s carnage from the safety of the sidelines.
While this breakout trade didn’t work, it didn’t cost me anything, so can we really call this trade a mistake? If it worked, I made money, if it didn’t, I got all of my money back. If only all of my bad trades could be this painless.
As for what comes next, this market remains stuck in a choppy, sideways consolidation near 5,100. Until further notice, expect these dips to bounce and for the bounces to dip. One day’s up becomes the next day’s down. Anyone predicting Tuesday is the start of the next big selloff will soon find himself just as disappointed as last week’s breakout buyers.
