Strategizing Around a Crazy Market Bounce
Well, patience paid off last Friday as the market rebounded strongly off a critical zone, reinforcing why it’s often wise to wait until the end of the trading day before making any moves.
What initially looked like a potential breakdown in the market suddenly shifted to a promising bounce on the longer time frame, creating a more bullish near-term outlook.
It was like two completely different markets.
That said, the market’s unpredictability demands careful positioning. While Friday’s action suggested strength, the possibility of a retest of the lows next week remains on the table.
To balance this uncertainty, I did opt for a pair trade, but with a twist.
Initially, I planned for a more bearish stance. However, Friday’s crazy action led me to adjust my approach, flipping the strategy to include a QQQ bullish position and a SPY bearish position:
I think the lesson here is two-fold:
- Understand the nature of the market. We’re not always “bullish or bearish” as much as I wish that were the case. The current market environment has equal potential for sharp rebounds and lingering downside risk. Trade them both!
- Patience isn’t just a cliche. It’s easy to pat someone on the back and say “just be patient.” I find it’s often useless advice. But in the markets, it can be gold. And I think waiting for the longer term view to settle can be the difference between wreaking havoc in your account and having a solid plan forward.
This kind of adaptability is key in volatile conditions. I’m always preparing for a range of outcomes, whether the market continues to climb or dips again. It’s a reminder that while the market can pivot quickly, so can we—provided we stay disciplined and ready to respond to what’s unfolding.
Last Friday was a great reminder to never have a strong, narrow-minded opinion on the market.
Sometimes the best strategy is the ability to change our minds.
Happy Holidays,
Nate
P.S. Here’s another solid strategy I’m leaning into for 2025.
