Date: 2024-12-19

The Stock Market Just Changed – Here’s Why

The dynamics of the stock market are in a constant state of flux, influenced by myriad factors both predictable and unforeseen. Recently, a significant shift was observed that brought a considerable change in market trends. This analysis delves into the factors that led to this transformation, using real-time reflections and strategic foresight from an experienced trader with over 30 years in the field.

Understanding Market Dynamics Post Shift

Impact of Fed’s Stance on Market Trends

One of the most critical elements that influence stock market dynamics is the monetary policy set by the Federal Reserve (Fed). As observed, despite a bullish phase where the S&P 500 surged approximately 26-27% and over 40% in two years, the reality of an accommodating Fed became questionable. The Fed’s role shifted as the market entered a more corrective phase, driven by worsening sentiment and a need for strategic adjustments in policy to address market rates going lower.

Technical Levels and Market Response

From a technical perspective, certain levels became crucial during the trading turmoil. For instance, there was a pivotal moment when the market failed to maintain a peak above a previous high and instead, breached a significant support at 6028 swiftly moving below the 21-day moving average—a commonly watched technical indicator. This breach indicated a shift in the short-term trend, leading the trader to reassess their positions dramatically.

Following the break, the market tested another significant level at 591, aligned with the 50-day moving average. Failure to hold this level culminated in further decline, plunging to around 585, which highlights the intense volatility and the rapid re-evaluation by traders.

Trading Strategy and Reflection

The reflections on trading strategy during this tumultuous period are invaluable. The trader noted the importance of adhering to established trading rules and the necessity to continuously evaluate and adjust strategies. For instance, in hindsight, selling earlier or shorting at the discussed levels could have mitigated losses or even secured profits. However, the reality of trading often includes rapid developments that require quick decisions under uncertainty.

Post-event analysis is crucial. The trader in question uses these experiences to build on strategies, noting the importance of learning from each day’s trading outcomes, documenting thoughts, and adapting methods moving forward. This iterative learning process is essential for long-term success in trading.

Moving Forward: Strategic Planning and Future Projections

Scenario Analysis and Preparedness

Looking forward, the trader outlines potential scenarios to strategize future trades. Key levels such as 591 and 596 become focal points for observing market reactions and planning entry or exit points. These levels serve as benchmarks to gauge the strength of the bounce back or the potential continuation of a downtrend.

Potential Market Recovery and Reassessment

After a significant downturn, understanding the nature of the market bounce back is crucial. Using retracement rules and other technical analyses helps in determining how strong a recovery might be or if it’s merely a temporary reprieve before another dropdown. The analysis also considers whether the bounce back is strong enough to shift market sentiment positively or if it’s another setup for a potential sell-off.

Conclusion

In summary, the recent shift in the stock market provides a comprehensive case study on the interplay between federal policy implications, technical levels, and trading strategy. For traders and market analysts alike, continuous learning from each market movement, coupled with a strategic approach to trading rules and discipline, remains key to navigating the complexities of stock trading. As market conditions evolve, so too should the strategies that traders employ, adapting to new information and maintaining agility in decision-making.

This article serves not only as a reflection on a pivotal moment in market history but also as a guideline for traders aiming to refine their strategies through both retrospective analysis and prospective planning. For a deeper understanding of these concepts and to stay updated with real-time market insights, engaging with trading communities and educational resources is highly recommended.

Watch this video below for more info:

The Stock Market Just Changed – Here’s Why



2024-12-19 13:41:08
https://www.t3live.com/scott-gap-ebook-yt to get Scott Redler’s new gap trading ebook. Includes case studies on trading Microosft, Netflix, Shopify, Tesla, and Meta with stock and options.

Video transcript:
wow what a day huh guys it’s interesting I’ve been doing this for 30 plus years and and I’ve been through so many days like yesterday the only thing you could do is look back and and and look at the charts and look at the levels and then look at your positions and look at what you did right what you did wrong how could you have saved money how could you have made money how could you have been opportunistic did you follow your rules did you follow your process and it’s just so easy to see the next day when you look back like oh my God all I had to do is sell it here and short it there all I had to do is wait for this level versus No Man’s Land all those things that go through your mind either the night of or the day after and then what you do is you just write them down you learn from it and then you move on at this point yesterday’s behind us the trade changed there was a lot of complacency out there there was a lot of Battlegrounds like you know the conversation was Will with the poor ad lines where they were selling everything but keeping some mag seven up and this and that who is going to win was Tech going to hold up and were we going to be in some kind of cruise control into your end or was the underlining weakness going to roll us over with tech pulling back and breaking key levels and although everyone kind of knew that the FED would be hawkish sometimes what was that movie reality bytes the reality of the situation is when the S&P is up 26 27% you can’t have an accommodating fed you can’t have a fed that’s going to say I’m going to cut 100 basis points next year when the S&P in two years we’re up like 40 something per. so the only way the FED gets accommodative is if all of a sudden you get in a corrective stage sentiment gets poor and then all of a sudden like oh now we can cut because the markets taking rates lower and they say that they don’t watch the market but they do it is what it is so this was yesterday during the day I’m like like we had a a red dog reversal where went above a prior High didn’t hold it and then took out 6028 so right there that was the level we took out the 21 Day thousands of times I’ve written eBooks about when you’re below the a21 day you have to adjust you’re no longer in the same type of trend which we’ve had I said to myself hey maybe we hold 591 which would be the 50-day so that’s when I had my major loss yesterday I started buying a little bit ahead of 591 it blew through 591 went to 585 went down another five points I had way too much spies instead of making and being at the highs of my year I lost a bunch always read the language because the language kind of tells you what happened so now I approached the day with so much less on so I’m okay with that the trade changed I’ll move forward some people like oh just buy the dip well you don’t know where this Dip’s going if you trade for a living and it’s December 19th you’re like I’m just going to buy the clothes you could have downside follow through last night the spies were trading at 583 and then you have a gap down to the 100 day key stocks went to the 100 day so if you’re just buying this CU like ah buy the dip that’s the way you do it for 100 years okay but you could have continued to buy the dip lost a lot of money and who knows if we were going to bounce here so what am I thinking now so here is the spies okay you’re getting a bit of a bounce back so it’s up 260 bottom line is you’re bouncing up 270 so we’re up a little bit so now you use retracement rules I posted those cheat sheets to retracement rules to figure out how much control does this candle have meaning what type of Bounce are we going to have did was this the get all the fluff out get all the complacency out get everyone negative then all of a sudden we rebuild and we grind back higher into the end of the year here or does the rally get sold for continuation to the down move so the question is what type of bounce back do we have so if right now we bounce to 591 which is another $2 from here put your overlay your retracement that’s probably a 38.2% retracement but that would be a pretty feeble rally if we get here and then go red if we get here pause a little bit and then push up a little bit then you really have 596 that would be where if the sellers want to continuation move to the downside into the end of the year they probably don’t let the Bulls retrace and Rec clim 596 so in my head I’m putting out plan A B and C so one plan is maybe gets to 591 but you don’t just short right here some guys like I’m going to short the open the trades change we’re going lower we’re going to be at least at 576 but if you short 589 which is really no man’s land they could go to points more in your face and then all of a sudden it pushes through you’re like wow I just lost 10 15 grand and get out of the way and then 11:30 it reverses so you have to figure out you know how involved you want to be to me again this 591 596 are two levels that I’m going to be watching that if you play a bounce maybe there’s room to there but make sure you’re not buying there and if you’re looking to retrace or or short a bounce these are two spots The best scenario would have been if we were opening in the hole a little bit you could buy Versa 550 minute low in the hole Versa level so your risk is defined and then you see where we could bounce to and you make some money so at this point those are your levels here’s the low here is where it could potentially bounce back and get rejected and then this would be a big line in this end moving forward sign up for Scott’s free newsletter by scanning a QR code or click clicking on the link in the profile bio