Stock Market Update | The markets go over the falls – Is Trump to blame?

In last week’s update I warned of a break below 5500 on the S&P500 and a break below 19150 on the Nasdaq 100 being a critical point for an accelerated drop in the markets. We certainly saw that come true this week!

In the S&P500 over the last two days we have seen two pretty large red candles with two pretty decent sized overnight gaps. This seemed pretty extreme to me, so I ran a quick test to see how many times this has occurred in the last 30 years…

Can you guess how many times this has happened?

It has happened just 5 times since 1993 including this week!

In fact those times have all occurred since 2009. This is not a regular occurrence in the US Stock Market.

I can almost hear you asking “what happened next the last time this happened?”

With just 4 previous data points, what happened the previous times is irrelevant – there is no way we can draw meaningful conclusions from so few data points. Plus it was a bit of a mixed bag anyway, so we can’t draw any conclusions from it. What we do know is this is a very uncommon situation and the markets are highly uncertain right now. 

Looking at the charts the next logical support level is around 5000 on the S&P500 and ~17,400 on the NDX… below those levels there is a pretty long way to fall, so strap in, this is going to get interesting.

I am very thankful my portfolio of systems was pretty much neutral US stocks going into this, and my major long exposures are in the Hong Kong market which has held up much better than the others as you can see in the charts below. This, once again, reinforces my belief that international diversification is becoming more and more important.

Looking at the table of global indices below the story is pretty clear this week – down across the board. If you are long only in stocks there wasn’t really anywhere to hide – it is just about which markets have been hurt less.

As much as I would love to blame someone else for dips in my portfolio, I learned a long time ago that I am responsible for my money.

This goes for all of us.

So should you do if you are suffering badly this week?

The best advice I can give you is to get educated and start building a globally diversified portfolio of strategies that allows you to trade long / short so this situation doesn’t hurt too much.

Probably the biggest mistake I have seen traders make recently was FOMOing into the Nasdaq right near the top because they were missing out all the way up. 

Now there will be people trying to buy the dip thinking it has to bounce or putting on big short positions thinking it is the end of the world. BOTH of these are mistakes unless they are part of a proven, backtested trading system.

Emotions and trading don’t mix.

Blame and trading don’t mix.

FOMO and trading don’t mix

The answer to long term survival in the markets is acceptance. What do we need to accept? Here are a few things that I would suggest you work on accepting:

• Uncertainty is constant: You’ll never know for sure what the market will do next. Success comes from following your system, not predicting outcomes.
• Losses are inevitable: Even the best systems have losing trades. Accepting losses as part of the process is crucial to staying disciplined and consistent.
• Patience is key: Most of your profits will come from a small number of trades. You’ll need to sit on your hands and wait for the right signals, even when it feels like nothing is happening (or everything is happening without you because you are not in a trade).
• Discomfort is normal: The market will test your resolve with volatility, sudden shocks, and unexpected moves. You must learn to act on your rules, not your emotions.
• You can’t control the market: Trying to force outcomes or “be right” will lead to frustration and losses. Focus on managing your process, not the market.
• Temptation will strike: You’ll feel tempted to abandon your system, tweak rules, or chase trades. Resisting these urges is critical to long-term success.
• Emotional detachment is essential: You can’t let fear, greed, or overconfidence dictate your decisions. Detach from the outcome of individual trades and focus on the bigger picture.

These challenges are tough, but mastering them is what separates successful traders from the rest. I would encourage you to cultivate the attitude that no matter what happens in the market, it is “interesting”. If you see that the market fell 6% over night, say to yourself “That’s interesting”, rather than blame, fear etc because they will only hurt you as a trader in the long run.

Just as an example, my response to the two gaps down and two down bars was literally:

“That’s interesting, I wonder how many times that has happened and whether there is a reliable opportunity to build a system out of.”

This is how you want to think as a trader, because if you don’t, you will burn out or loose your shirt… or both.

I went to the beach for breakfast this morning, and it was a great reminder that the markets tanking does not impact everything. The sun was out, the ocean was beautiful and it even sparked some creative trading system development ideas.

If you don’t know what to do next, or you are uncomfortable with your current drawdown, want more diversification, or you just want to learn how to backtest your strategies to build the unshakeable confidence you need to keep following them then click there to apply to join The Trader Success System. Our goal with all members is to put you in a position of control so that you can trade with confidence no matter what the market does.

Trading Tip: Managing your Trading Psychology

When markets are volatile or falling fast, managing your psychology becomes absolutely critical to avoid costly mistakes. One of the most effective ways to stay grounded is to focus on your trading process, not the market chaos. Ask yourself, “Am I following my system?” rather than obsessing over the outcome of each trade. This shift in focus helps you detach emotionally from the noise and stick to your rules, which is essential for long-term success.

Another key is to embrace the fact that uncertainty and losses are part of trading. Even the best systems have drawdowns, and trying to avoid them by making impulsive decisions—like skipping trades or adjusting position sizes—will only undermine your results. Instead, trust the work you’ve done in backtesting and remind yourself that your system is designed to handle these conditions. Confidence in your system is the antidote to emotional reactions.

Finally, take care of your mental state outside of trading. Stress management techniques like exercise, meditation, or even just stepping away from the screen can help you stay calm and make better decisions.

Remember, your ability to think clearly diminishes when emotions run high, so staying composed is your edge in volatile markets.

Quote of the Week

That’s all I’ve got for you this week – the sun is shining and I am out the door to watch my daughter play netball.

I appreciate you, stay calm, test your ideas, reply to this email if you need help and I will do my best to point you in the right direction.

Remember – You are only one trading system away!

Adrian Reid

Founder, Enlightened Stock Trading