Sell the news? Not so fast.

By Jani Ziedins | End of Day Analysis

Jan 17

End of Day Update:

The S&P500 slipped modestly following the MLK holiday. Brexit headlines make a comeback when the British Prime Minister laid out her plan for leaving the EU. The pound rallied sharply when she said she the matter would be voted on by Parliament, but the same enthusiasm didn’t spread to equities.

The biggest event this week is Trump’s inauguration. Previously I suggested we could experience a sell-the-news deflation as air leaks out of the Trump rally next week, but now it seems like everyone is touting the same thing so now I’m no longer convinced. The more people expect something, the less likely it is to happen. That’s because traders try to get ahead of the market by trading early, but their early trading actually prices in the expected move before the event. If too many people expect a sell-the-news event this Friday, they are taking profits this week and could be the reason we are struggling with 2,280 resistance. Once this proactive selling subsides, we could actually do the opposite and continue rallying after the inauguration.

No matter what happens, we are within spitting distance of all-time highs and only the most stubborn bears are claiming the world is falling apart. The longer we hold near the highs, the more likely it is we will break through them. Markets tumble quickly from unsustainable levels and right now the market is quite comfortable near these highs. At this rate it will only be time before we break through and test the psychologically significant 2,300. No matter what the market “should” be doing, when confident owners keep supply tight, prices continue creeping higher.


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About the Author

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.