Every day is different in the market …
To stay at the top of their game, the best traders I know, including my millionaire students like Jack Kellogg, have learned a key lesson that most people overlook:
There’s power in taking a step back.
If you’re glued to your screen every day, hoping for action in a dead market, you’re doing it wrong.
But when do we step back? And for how long?
I know that it might not seem like it because of the insanity of the last few weeks, but the stock market has seasons.
There are hot streaks, cold spells, and flat stretches.
For example, Monday’s market was slow.
Premarket momentum was light, a few early spikes faded fast, and by the time most traders were fully caffeinated, the best opportunities were already rolling over.
I wasn’t the only one who thought so. Watch my two millionaire students, Matt and Bryce during their livestream from Monday below:
Sitting on your hands can be a strategy.
You could also go for a walk, get some fresh air, go fishing, study past setups to prepare for the next hot market, etc.
We didn’t get into trading to be a slave to the screens. We got into this for freedom. And it starts with knowing when to step back.
Now … On the topic of Monday’s lackluster momentum:
Is it a coming sign of the pullback that investors have feared?
Should we prepare to trade less in the days ahead?
Fading Market Momentum
I was still able to find some trade setups on Monday morning.
Like my 10% profit on Maison Solutions Inc. (NASDAQ: MSS).
The stock spiked 580%* on Monday during premarket hours after the company announced a $70 million private placement.
I found the spike early thanks to the StockToTrade Breaking News alert service.
Look at the chart of the MSS spike below. Every candle represents one trading minute:
Get the next Breaking News Alert.
Even with a 580%* spike, this stock lost all of its momentum by the time the market opened for regular hours.
Predictive Oncology Inc. (NASDAQ: POAI) was an even better example of the weak spikes from Monday.
The stock ran 480%* during premarket hours after it announced a $344 million private placement.
Look at the chart below:
These were the biggest spikes of the morning with news catalysts.
And the quick reversal of the moves was a hint that there wasn’t much momentum in the market.
On top of that, last week was full of volatile catalysts. And the news this Monday was pretty sparse
It’s possible that investors are tired from an onslaught of volatility and had to take a breather.
Where Do We Go From Here?
Monday’s lack of momentum doesn’t mean the market is completely unraveling. It just means things are slow.
Major indices are still consolidating under the highs. Likely until we get another big market catalyst to send us in either direction.
On the chart of the S&P 500 ETF Trust (NYSE: SPY) below, every candle represents one trading minute.
I’m not here to guess about the direction of the market.
Instead, I let the market tell me what it wants to do. Then I react to its signals:
- Does it spike up or down?
- Is there low or high volume?
- What are the implications of any market-wide catalysts.
On Monday, the momentum faded quickly and there weren’t many plays. The best plan of action was to take a step back and save your account for the real runners.
Things will heat up again.
We just have to keep checking the market until we see renewed strength from our favorite plays.
Until then, keep studying this process.
Cheers
*Past performance does not indicate future results
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