Don’t Get Sucked Into the News Cycle

[Trading With Larry Benedict]( Don’t Get Sucked Into the News Cycle By Larry Benedict, editor, Trading With Larry Benedict Last week was a tough week for investors… According to The Wall Street Journal (WSJ), the Nasdaq’s 5.8% drop was its worst week since January 2022. And the S&P 500 only fared slightly better… Despite a supposed rotation into defensive stocks, the S&P 500 fell 4.2% over the same time. It all fed into the narrative about September being a tough month for stocks. As the WSJ further noted: Going back to 1928, the S&P 500 has declined an average 1.2% in September, the weakest month of the year for stocks. That type of statistic might scare plenty of investors off. But it doesn’t mean you should avoid stocks this month altogether. You just need to know how to trade them… Recommended Link [Expert: The most important message you’ll see in 2024Â]( [image]( No matter how much money you have… How well-connected… Even if you’re retired with a comfortable nest-egg… [This]( could be the most important message of 2024. In short, America is being invaded… But not by immigrants at the border. The invasion spreading across America is coming from the ports, highways, and railroads. AND it’s being invited in by the White House. Many could be blindsided, but if you prepare today, you could come out far ahead. [Click here to see how before it’s too late.]( -- Based on Emotion One of the key mistakes investors make is having an “all-in” or “all-out” approach… They buy into the market when there’s lots of positive news around. And they bail out when that news turns negative. The problem is that these decisions are based on emotions. I learned from painful experience that is an extremely low-probability way to trade. Plus, the news is historical… Yet markets always look to the future. So trading off the news puts you behind the curve. It means you could miss out on plenty of profitable trading opportunities. That’s why I watch technical indicators on the chart instead. They let me know when a stock could be due for a bounce… even when the news is all negative. Watching Momentum One way I look for trading opportunities is by monitoring momentum… Typically, folks use momentum to identify a trending stock. So, for example, if buying momentum is increasing, they’ll see that as a bullish signal and a reason to buy the underlying stock. Yet I use momentum differently… I look for a momentum reversal as a potential entry point for a mean reversion trade. That is, I place a trade when a stock has overshot in one direction and is likely to snap back the other way. To see what I mean, consider the chart of the Nasdaq-tracking Invesco QQQ Trust Series 1 (QQQ) below. The Relative Strength Index (RSI) in the lower half of the chart shows buying momentum. Invesco QQQ Trust Series 1 (QQQ) [chart] Source: e-Signal ([Click here to expand image]( As you can see, QQQ’s sharp fall in July coincided with the RSI inverting and tracking lower. The inversion occurred above the upper gray dashed line – a level that represents overbought territory. The RSI fell and then rebounded off its August low. But around mid-August, it rolled over and has been tracking lower again. At the same time, you can see QQQ making a lower high in mid-August and tracking lower. In these examples, declining momentum (RSI) led to QQQ falling. Free Trading Resources Have you checked out Larry’s free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. Forming a ‘V’ Given the recent action, I want to concentrate on the bottom half of the chart (orange circles) today… That’s where the RSI rebounded higher from oversold territory (lower gray dashed line). As you can see, when the RSI formed a ‘V’ and bounced off that oversold level, QQQ bounced as well. That happened in October last year and April and August this year… The chart shows that the RSI could soon be tracking in the same territory (red arrow). That could set up QQQ for a potential bounce… Take another look: Invesco QQQ Trust Series 1 (QQQ) [chart] Source: e-Signal ([Click here to expand image]( The key thing is to be patient and wait for a defined ‘V’ before considering opening a long trade. We want to see the RSI turn and start to rally. Of course, like anything in the markets, there are no guarantees… The RSI’s initial bounce could fade, leading to QQQ making another leg lower. But as the orange circles show, waiting for the right trade setup puts the odds dramatically in your favor. So don’t get caught up in negative news… Instead, watch the charts. Regards, Larry Benedict Editor, Trading With Larry Benedict [The Opportunistic Trader]( The Opportunistic Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.opportunistictrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. The Opportunistic Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-208-6550, Mon–Fri, 9am–5pm ET, or email us [here](mailto:feedback@opportunistictrader.com). © 2024 Omnia Research, LLC. All rights reserved. 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