Doing the Hard Thing

End of Day Update:

An ugly day in Europe spilled over to US markets. We gapped through 2,100 support at the open, triggering a wave of technical and emotional stop-loss selling that pushed us down to the 50dma. But as quickly as the selling hit us, it dried up and we bounced off 2,085. By the second hour of trade, we were safely back to 2,100 and the day felt much less ominous.

Since February, the market’s been stuck between a gently rising 50dma and 2,120 resistance. Everyone knows this ever tightening range will eventually resolve itself, the only question is which direction. Each time we reach the upper limits, buyers walk away and we stumble back into it. But just as reliably, each dip is met by indifferent owners who know we will bounce like every other time. As bears are finding out, it is frustratingly difficult to get a selloff rolling when no one wants to sell.

Which side is going to flinch first? While there are no guarantees in this game, we can look to history for guidance. Overbought and unsustainable markets implode with breathtaking speed. They runup on euphoria, stall as the last the board the bandwagon, and collapse when everyone tries to leave at the same time. But this market is behaving in almost the exact opposite way. We have been trading sideways for months and every selloff stalls on complete indifference. Calm and confident owners are the last thing anyone betting against this market wants to see. But that is exactly what we have.

Every attempted selloff is rebuked and the longer we hold near the highs, the more inevitable it becomes that we will smash through them. This market has been given every excuse to devolve into an emotional bloodbath. Scary headlines, big downdays, violating key technical levels. Every ingredient is there……..except the selling. When the market refuses to do the easy thing, then we know we have to do the hard thing, and right now that is sticking with this pig.

Jani

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