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Why I Expect a Bounce Is in Store for a Beaten-Down, Oversold Market

by | Sep 2, 2022

I hope everyone is enjoying a nice Labor Day weekend and some much-needed time off after a brutal period in the market…

We almost saw the second period of five straight days of selling since 2015 until a late rally pushed the Dow and S&P 500 into positive territory late Thursday. 

But here’s the good news… I see an imminent bounce coming. 

What’s happening right now is partly thanks to what Federal Reserve Chair Jerome Powell said on Aug. 26 at the annual meeting in Jackson Hole, Wyoming. The market got ahead of itself by pricing in a more dovish Fed in regard to its interest rate plans… and that did not happen.

The Fed seems hellbent on igniting a recession in order to tame inflation. Senior Strategist Roger Scott has been of the opinion that the Fed should just let things wind down naturally since inflation is already easing, and I’m starting to join that camp.

Because if the Fed continues on this path in being too rigid and dead set on having higher and higher rates, it will be its second major mistake in two years… the other being not raising rates soon and high enough. I don’t think our economy or the stock market can handle it right now.

I don’t trust Powell to do the right thing by changing stance when they need to, and the Fed is always behind the curve. So it’s a nerve-racking — but also an exciting — time to trade…

Because there’s a case to be made for brighter days ahead… From a historic statistical analysis standpoint, we should be close to a short-term bottom. 

To have this sharp of a sell-off across virtually every sector of the market, it normally doesn’t last much longer than it already has.

So, yes, I expected a bounce beginning as early as Friday, and I expect it to be a big one. This is a treacherous market so you have to be super careful, so here’s what I’m doing…

Putting cash to work — just a little bit — because these are decent levels after so much selling. We could go a little lower but I don’t expect it to go too much lower. 

This is a news-driven tape, and it’s taking no prisoners. So again, be safe and don’t panic. I’m also keeping my inventory fresh and trading small, buying dips and selling rips. 

And like I said, it’s a new month, which means institutional money is flowing into all-new stocks…

Are there any topics you’d like to see me cover or questions you’d like answered? Send me an email at jeff@joyofthetrade.com! And be sure to stay ahead of the markets by subscribing to our YouTube channel and our Instagram page for all of the latest!

P.S. You’re Missing Out If You Don’t Know How to Trade Negative Momentum

The average negative momentum event in the markets — perhaps the most profitable time to trade as stocks sink — is about nine to 12 days.

We’re halfway through our fifth negative event of the year… So if you want to squeeze every last penny from our current sell-off, you need this new report now! 

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WRITTEN BY<br>Jeff Zananiri

Jeff Zananiri

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