End of Day Update:
The S&P500 did a lot of nothing Tuesday as we consolidated Monday’s modest breakout. It stayed inside a 10-point range and closed lower by less than a tenth-of-a-percent. The benign trade tells us most owners are not taking profits and continue holding for higher prices, while those with cash don’t feel compelled to chase the breakout.
When few change their mind, prices don’t move and that is what happened today. Every other time the market challenged 2,120 this year, we quickly retreated from the highs. Today’s close marks the fourth day in a row we finished above this widely followed resistance level, making this time different.
While there are plenty of negative headlines making the rounds, none of them are new as we’ve seen versions these recycled headlines for months. Anyone who fears these issues sold a long time ago and is why periodic flare ups here or there no longer dent this bull market. Many claim this strength in the face of so many worries is irrational, but it makes perfect sense if you understand how markets work. When there is no one left to sell, we stop going down.
If prices remain above 2,120, expect recent sellers and shorts to come crawling back as the fear of being left behind overcomes their fear of gloomy headlines.
Jani Ziedins (pronounced Ya-nee) is a full-time investor and writer who has successfully traded stocks and options for more than a decade. He earned a B.S. in Mechanical Engineering from the Colorado School of Mines and an MBA and M.S. Marketing from the University of Colorado Denver. His prior professional experience includes manufacturing engineering at Fortune 500 companies, structural engineering, small business consultant, collegiate instructor, 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 young children.