How much life is left in this rebound?

Free End of Week Analysis and Lookahead:

The S&P 500 extended its weekly win streak to three out of the last four and finally reclaimed the 200dma for the first time since early March. As much as it feels like the wheels are coming off the global economy, the S&P 500 is completely oblivious and 10% shy of all-time highs. (The Nasdaq is only 4% away.)

As much fun as it was watching the market rally 40% in two months, we need to keep our expectations in check. There is no way we will do another 40%. Even collecting another 10% to get back to all-time highs will be challenging. While this feels like an invincible market, someone always gets left holding the bag. Now don’t get me wrong, I’m not a bear or anything close to that. But I have been doing this long enough to know that we need to be really careful when this feels too easy. By the time this resilience is obvious to everyone, it is getting really late in the game.

Without a doubt, momentum can keep carrying us a little higher, but this is definitely a better place to be locking-in swing-trading profits than chasing prices higher. If we are in this to make money, the only way to do that is by selling our favorite positions. Being proactive usually means selling too early, but if we assume it is impossible to consistently pick tops, that means we either sell too early or we sell too late. I like selling too early because that leaves me in the best position possible to take advantage of the next opportunity. When everyone else is debating whether they should bailout, I’m looking at a buyble the dip.

But that’s just me. You do what’s right for you. As nice as this ride has been, it is probably time to start planning our exit. Whether that means selling proactively on the way up or following the market with a trailing stop and getting out on the way down, it doesn’t matter as long as you pick something. And even better, do a little of both! Take some profits proactively and hold the rest with a trailing stop. But whatever you do, don’t be that guy left holding the bag.

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