Daily Commentary: April 18, 2024

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Wait For Support and Trade the Bounce

Posted by Pete Stolcers on April 18

I would be taking gains on shorts if you see the pattern below.

PRE-OPEN MARKET COMMENTS THURSDAY – There are so many people who want to “help” me. Apparently, I am not aware of all of the negative market influences and they feel the need to enlighten me. Everything they’ve read points to a big market decline.

This is exactly why most people fail when they try to trade. They don’t realize that the news outlets are nothing more than cheerleaders. They are giving you the current weather forecast (rain), but they are not telling you that it is going to get sunny in a few hours (because they don’t know). These new sources are where traders get their information. Perhaps a “special guest” was on air and they shared a tidbit that sounded so compelling and not many people know about it. Their job is to act like an expert and to share this tidbit with the unsuspecting world.

The market is going to bounce. We just have to wait for support and I think we are close. At this juncture, this is a normal pullback in a bull market. Every Asset Manager has been waiting to buy a dip and now they have one. When we find support, they are going to buy. When they do that, stocks will jump and the people picking a market top are going to take a beating. When they take losses on their shorts, they are going to fuel the rally. A year from now, everyone will look back at this dip and it will be blatantly obvious that this was a buying opportunity. The fools trying to pick a market top will long be forgotten and a new crop will replace them during every market dip. I’ve been doing this a very long time and there’s a reason I’m still standing.

We’ve been waiting for a window of opportunity. When the market was trapped in a horizontal trading range, there was no momentum. The only way we were going to get it back was off of a market dip. We had to wait for that dip. The more bearish it looks, the better. “Come into my parlor said the spider to the fly.” Now that the market did pullback, all of the dip buyers have had a change of heart. “Pete might be wrong this time. This looks ugly.”

I don’t know how far the market is going to run, I just know that we are going to get a substantial bounce. I am waiting for support and I will take starter longs with the intentions of adding progressively on confirmation (continuation). How we bounce will tell me how high we go. I want to see stacked green candles and heavy volume. If I see mixed overlapping candles and light volume it will tell me that we might not make it back to the all-time high. Then I will start to reduce my risk. If we attack the all-time high I will add. From a race car driving perspective, we are coming out of the turn and I am ready to hit the gas on the straight away.

We did not get much of a market bounce yesterday. The pop in the middle of the session was slapped down. That is a sign that there is still selling pressure. It needs to run its course. I don’t trust gaps up. Wait to see if the gains hold. If we fill the gap, I want to see long green candles off of the low of the day. I need to see that buyers are aggressive. I would prefer to see one more probe and a selling climax that is immediately reversed. A gap down would have provided that, but we did not get one this morning. If you are short, tread very cautiously. I would personally be taking gains on all shorts here with the intent of focusing on the bounce. I still feel this is a good level to start entering bullish put spreads.

The bottom line is that I don’t know if a longer-term high is in. It could be. The depth and duration of this dip and the nature of the bounce will tell me if that is the case. Right now, I am focusing on the bounce.

Support is at $500 and resistance is at the 50-day MA

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