How to trade ahead of the holiday week

Free After-Hours Analysis: 

The S&P 500 slipped at the open, extending yesterday’s weak close. Fortunately, those early lows were as bad as it got and prices bounced into the green in the second half of the day.

Coronavirus headlines continue to be dreadful, but investors don’t price stocks based on where we are today, but where they think we will be six or twelve months from now.

As bad as these headlines are, most investors don’t want to sell their stocks at big discounts when they know things will get better if they hold on a little longer. And it is hard to argue with that logic. Between the expected stimulus, ultra-low low-interest rates, and highly promising vaccine candidates, the light at the tunnel gets brighter every day.

As I wrote last week, it looks like we are settling into a 3,500(ish) to 3,650(ish) trading range. And so far that’s been the case. There isn’t a reason to throw fresh money at stocks near the highs and there isn’t a reason to abandon good positions either.

Swing traders should take profits near the highs and those with cash should wait for something more interesting. Short a break under 3,500(ish) or buy a breakout above 3,650(ish). Until then, there isn’t much to do other than wait for the next trade. (and enjoy the holidays!)

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