SL:Why Bullish Sentiment Is Back (Even on Red Days)
From Panic to Optimism: Why This Market Feels Different—And How to Trade It
If you’ve been trading the past few weeks, you’ve probably felt it too.
The tone of the market has changed.
Earlier this year, we were in a straight-up fear cycle. Headlines came out, and the knee-jerk reaction was to sell. Didn’t matter if the data was neutral or even slightly positive—traders were looking for reasons to dump risk. Every news event was twisted into a bearish angle.
But now? That same news cycle is being used as fuel for bullish momentum.
It’s a subtle but powerful shift. And it’s something I’ve been watching closely, because it completely changes the setups that work best.
We’re still in a news-driven environment—but the interpretation has flipped. Where we used to default to panic, the market is now leaning into optimism. It’s looking for reasons to buy. And that changes the game.
Take the small caps, for example. Earlier this week, IWM (the small-cap ETF) ripped higher overnight on tariff news. The logic? Less trade pressure means a tailwind for smaller U.S. companies.
That part made sense. But the move was too much, too fast—and sure enough, the morning open brought a harsh reality check. The headline wasn’t a full repeal of tariffs. It wasn’t permanent. And the market quickly re-priced that nuance.
By late morning, IWM had not only given back the entire move—it was underperforming again.
It was a textbook example of an overreaction followed by a hard reset. And it created an opportunity: fade the emotional move, and lean into the reversion.
These are the kinds of setups that pop up in optimistic markets. People get too excited, too quickly—and if you’re watching for the second leg (the reaction to the reaction), there’s a real edge there.
Now, here’s the part that messes with people’s heads: sometimes the market sells off after a good headline. Not because the news was bad. But because the move up gave institutions a window to sell.
That’s not bearish. That’s just liquidity.
Big players use strength to exit, and when there aren’t enough dip buyers to hold the rally, the price fades—not due to fundamentals, but simply a lack of follow-through.
That’s why I love red closes after good news. If the underlying story still makes sense, and the chart resets back into support… that’s where I want to be looking long.
So what does this all mean?
It means this market is still messy. Still driven by headlines. Still full of noise.
But underneath it all, the tone has flipped.
We’re in a market that wants to go higher—where traders are leaning bullish until proven otherwise. And that means we’re going to keep getting these exaggerated moves, short-term fakeouts, and fast rotations.
If you can stay objective and avoid the emotional whiplash, this is a fantastic environment for short-term trading.
Just remember: the first move is rarely the best move.
Trade the reaction to the reaction—and you’ll be one step ahead of the crowd.
— Nate Tucci
