What to expect headed into the holidays

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The S&P 500 slipped modestly Tuesday, but this shouldn’t surprise anyone. The index rallied 11% in November alone and we’re barely two weeks into the month! Anyone holding out for more gains is getting a tad greedy.

Two steps forward, one step back. That’s the way this works. Always has, always will.

Without a doubt, momentum is higher and we could coast up to, and even though, last week’s intraday highs (3,646), but we shouldn’t count on stocks going a lot higher. This is definitely a better place to be taking short-term profits than adding new money. Novices chase prices after an 11% runup. Savvy traders are the ones taking their money.

Stocks consolidate gains one of two ways. The far more predicted way is stepping back to support. But far less appreciated is the sideways grind. Stepbacks are quick and great for swing trading. Sideways moves bore us to tears. Unfortunately, we don’t get to choose what the market gives us.

Heading into the year-end holiday season, we should dial back our expectations. Most of the big buying has already happened and institutional money managers are either going skiing or flying south for the holidays. That means little guys are taking control. And while little guys make absurd trading decisions, they don’t have a lot of money and cannot drive the market very far. That means choppy moves that don’t go very far before reversing.

Expect stocks to trade sideways into year-end. Maybe we grind up to 3,650 resistance. Maybe we dip back to 3,500 support. Either way, plan on stocks bouncing back from these support and resistance levels, not extending into a much larger move.

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