The S&P500 continues to flirt with the 1400 level for the 5th day. We are not selling off, but we are not surging either. It seems we have a staring contest between the bulls and bears to see who blinks first. But the lack of a sell-off from these elevated levels is far more encouraging than the lack of follow on breakout buying is concerning. It is far easier for the market to fall than it is to climb. So holding a key level is in fact bullish, especially in the face of all this skepticism.
This tight sideways trade is not something we’ve seen out of the indexes in quite some time. We’ve had very small intraday ranges and even tighter closes. Chances are this is building to something and we’ll probably see a 1%+ move out of this when we get a headline that excites traders either up or down. An upside move will put pressure on the bears to change their minds or at the very least cover the shorts they’ve laid down the last several days.
With the market hardly budging the last week, there is not much new to add. This stability supports the bull case and gives us the green light to buy CAN SLIM stocks.
There is always risk in the markets no matter how well things set up, so we need be mindful of our risk and stick with our stop-loss plans just in case the markets get caught off guard by an unexpected headline.
All of the above analysis is getting fairly redundant because we haven’t seen anything new from the markets in the last several days, but that quiet trade continues to support and reinforce the previous bullish analysis. Maybe next week we’ll see the upside breakout and the surge from short covering and chasing.
Stay safe and have a good weekend
Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.