It fell more than 1% on Tuesday morning as gas prices and interest rates continued to rise. But rather than trigger another wave of selling, most owners shrugged their shoulders and held on even after the index broke below support at $5,200.
The lack of reflexive selling created a price floor, and the market recovered nearly half of its initial losses by the close.
If stocks were significantly overbought and prone to crashes, prices would have fallen long ago. The market rarely takes this long to sell a top, so this is likely not the top.
A few hours of solid trading on Tuesday afternoon was great, but by itself it doesn't kill the selloff. That's why Wednesday's early trading will be important. If we survive that, the bears will be in big trouble.
Barring a dramatic waterfall drop Wednesday morning, this is simply another buyable push on the way up. That's how we do business. I bought a partial long position on Tuesday afternoon with a stop below the early low.
If the rebound continues on Wednesday afternoon, we will add more and move the first stop to the entry point. If the decline resumes, you will exit the stop partial position with a small loss, but not much.
To be honest, even if I have a partial position, there is a part of me that hopes this decline continues. The lower this falls, the greater the opportunity for profit the market gives us.
Unfortunately, I don't think I'll be that lucky and Tuesday's drop probably won't be that big. That's why I've already bought it.
