It’s been six days since I wrote the free post titled “Why this market is still buyable“. Back then the S&P 500 was 10% short of all-time highs. Today, we find ourselves only 5% away from that “unthinkable” mark.
As I wrote back then:
This paradox largely comes down to expectations of a quick recovery combined with unprecedented levels of government stimulus. As bad as the economy looks today, when governments are throwing unlimited resources at the problem, that’s enough to placate investors.
Nothing’s changed since then and is why prices keep marching higher. At this point, why argue with what is working? The index is almost certainly headed back toward all-time highs and the only real question is what happens after we get there. But as nimble traders, we can worry about that when we get there. Until then, enjoy this ride higher and keep moving your trailing stops up. Right now, some stops near Thursday’s close and another portion near Friday’s intraday lows look to be be pretty good levels.
Now, maybe this rebound is getting a bit too obvious to everyone and that causes these gains to stall short of all-time highs. But as long as we respect our stops, it won’t be a problem. In fact, for the disciplined and nimble trader, near-term dips are simply another profit opportunity.
As the cliche goes, “plan your trade and trade your plan”. Until something changes, keep giving this market the benefit of doubt.
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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.