Yesterday's market action was quite a sight to behold…
As the consumer price index (CPI) report came in cool — with U.S. CPI at7.1% vs. a 7.3% estimate — the market reaction wasn't what most traders expected.
The S&P 500 ETF Trust (NYSEARCA: SPY) was surging in Tuesday's pre-market, briefly touching a high of $414.
But as soon as the opening bell rang, the rug-pull began…
From 6:30 to 9:30 a.m., the index tanked from its pre-market high all the way down to $399, erasing 2.5% gains in three hours.
Anyone who bought calls at the open got absolutely wrecked, and anyone holding calls from Monday saw their gains decimated rapidly (if they didn't sell at the open).
I can feel the pain in the markets. A lot of retail traders clearly got overexuberant piling into bullish positions yesterday.
That said, I wasn't surprised by the price action at all. I even tweeted about how skeptical I was on Monday…
My weariness came from experience. I've seen this kind of rug-pull move so many times before.
All in all, there are some important lessons traders can learn from days like yesterday.
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