May 13
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

Stocks gave up early gains and slipped back to 2,100. We find ourselves stalled again in this 2,100-2,120 zone where no one wants to buy. While I’d love to see prices explode higher, I’m not all that concerned about this morning’s price-action. It’s understandable that few want to buy since we turned back from this level so many times before. Those with gains are defensively locking-in profits and anyone with cash is reluctant to buy near obvious resistance. But with every passing day, we are inching closer to the point where all these people will need to buy.

There are plenty of scary headlines coming from Asia, Europe, and the US. But all of them are recycled stories that we’ve been talking about for weeks, if not months. Does anyone still care if Greece stays in the Euro? I’m sure most European taxpayers and the financial markets would be happy to see them gone. Any major bank that still has unhedged Greek exposure after all these years deserves to go out of business. The US economy is growing frustratingly slow. Who could have possibly seen that coming? The Fed raising interest rates from the absurdly low 0%. That’s another shocker out of left field.

Sarcasm aside, everyone knows these things. If owners held through last week’s spate of bearish headlines, more than likely they will hold through this week’s bad news too. Prices only move when people change their mind and so far these owners are proving to be an exceptionally stubborn group.

The real pressure is going to be applied to recent sellers when they see the market take off without them. Their chasing is what will fuel the next move higher. That doesn’t necessarily mean the breakout will be sustainable, just that we are far more likely to hit 2,150 before 2,050. Depending on how many people are underweight this market and how acute the chasing becomes will determine how much further than 2,150 we go. But the longer we hold near the highs, the more likely it is we will smash through them.

Jani

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About the Author

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.

Martin May 13, 2015

The truth is that recently I saw a chart (don’t remember where) showing the market move and corresponding retail investors’ money outflow from the funds. After every record outflow, the market shot up and moved by a large leap. These days the chart also showed a record outflow, which corresponds with what you are saying and what makes me think that we are really in front of a big move up. Hope that assessment is correct.

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