Know what to do when this hits?

A break in the market

As you know, on August 5th the stock market broke it’s June and July ebb and flow higher, and turned into a news driven, volatile, market. Throughout this time, we’ve had varying statistics, facts, policies, and opinions throwing the market back and forth.

And the technicals haven’t been able to recover fully. 

What does this mean, and what can you do about trading with it?…

The S&P Futures: Daily Chart 8/30/19

In June and July of 2019, the stock market exhibited a nice trend upwards, until a normal pullback turned into a market break. You can see the giant, bright red candle, that broke through the 50 SMA (yellow line), and then closed at the lows. 

Think of it like the following situation…

Think about a fight you’ve had with your spouse, or anyone you love, when you say something in the heat of the moment that you immediately know was the wrong thing to say.  

Of course, it’s too late to take it back. The damage has been done. What has been said was said, and the reaction can often be quick and emotional.

It’s like when key support breaks, and it’s done in a hard and fast way.

I know for me when I’ve done this, I feel a harsh wave of regret. I know it’s not going to be okay immediately. So, I try and apologize, and figure out what to do. I try to clarify what I meant. I attempt varying methods of giving space, being attentive, and focusing on the good. 

Like the barrage of news reports arguing for or against trade war, economy, and stock market statistics hitting every other day…

While these attempts may help to varying degrees, and some more than others… everything doesn’t just go back to how it was the day before. 

It takes time and effort to repair. A lot of work goes into making up for something so harsh.

It takes a significant catalyst to make up for such a key price break. 

Maybe it takes a couple days to shake out, or maybe a week. And, you hope, when it does things are better instead of worse. But you know that the best you can do is watch how it progresses a day at a time. 

The same goes for the stock market when the indexes experience a major break of support. 

After this happens, it’s going to bang back and forth, between support and where there’s now resistance — until finally the emotion fades and one side shows conviction and makes a decision. But, you have to know where the limits are, and what it looks like when they’re pressed.  And that goes for both trading and your argument!

What to Do Now

Right now, my key area of focus is on the overhead resistance. Of course, I pay attention to the news and the various stats and policy adjustments that are currently impacting price action. But, at the same time, this is never going to tell you exactly how to trade. Macro events and political policies can tell you about sentiment, give you a larger understanding of how markets function, and keep you up to date with current events that are impacting you. Particularly as the trade war escalates, we talk about how that impacts volatility, market stability, and particular sectors.

But… to actually place trades, it always comes down to how price acts in various spots, and using technicals to identify your edge (or lack thereof)! 

Currently the indexes are right at the key area of resistance. Identifying this spot, and knowing what it means when it breaks, is the technical key towards placing great trades. 

Do you know: will it’ll break higher, or lower, and what do you do when it does?

Identifying the Area — and Acting Accordingly

During yesterday’s first live trading day as apart of my Stacked Profits Mastery program, we discussed exactly this! I’m so happy I was able to share that with our members! 

During the three hour session, I taught exactly how to identify this area, and how to adjust strategies accordingly. The recording is available to stream immediately for Mastery members here.

AND if you’re interested in learning more about that live trading session, plus trade alerts, weekly watchlists, a forum, and more… you can get all those details here.

You can also check out a recent article I wrote for the Nasdaq all about resistance here.

“But What About My Marriage, Danielle?!”

 

1 thought on “Know what to do when this hits?”

  1. Thank you Danielle! I always look forward to your columns, appearances and room chats to help me keep perspective. You are one of the few analysts that isn’t afraid to say there is no clear direction in the markets and that it’s OK not to trade, rather than force a trade for the sake of trading. I appreciate not losing money thank you! Now, about marriage… isn’t love never having to say you’re sorry… haha. No, just learn to grovel, like the pup, when you do. Love that pic!

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