How to trade this market as it approaches all-time highs

Free After-Hours Analysis: 

The S&P 500 popped Monday morning, establishing a new higher-high for this Covid rebound.

As bad as headlines have been, this market continues grinding higher and the index is within 3% of all-time highs. This relentless strength feels shockingly counterintuitive. But the thing we can never forget we trade the market, not the headlines. No matter what we think “should” happen, successful traders always focus on what “is” happening.

Institutional money managers need to anticipate what is around the next corner. It takes weeks, even months for them to move billions of dollars in and out of the market. But as independent investors, we can do the same in less time than it takes to read this post.

Far and away the greatest strength we have is the nimbleness of our size. That lets us ride these counterintuitive moves higher with little risk. We don’t need to know what is around the corner because we are fast enough that we can trade around it when we get there.

If we finally come across a headline worse than a global lockdown, the fastest economic collapse in modern history, and the highest unemployment since the Great Depression, we can pull all of our money out in hours, if not minutes. I have no idea what is worse than the headlines this market already shrugged off, but if it happens, I’m confident we will be able to trade around it when it does happen.

What comes next? Well, more often than not, the market moves to the level everyone is looking at. I’ve been saying for a while this market will challenge all-time highs near 3,400 and I don’t see anything in today’s price action that changes my mind. As long as we continue experiencing more up than down, the rebound is alive and well. There is nothing for us to do other than sit back, enjoy the ride, and keep moving our trailing stops up. (Around 3,200 seems like a good level)

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