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It’s been a crazy few days for the S&P 500.

Stocks exploded higher Monday morning after a vaccine candidate proved 90% effective in preventing COVID-19. Unfortunately, the buying frenzy didn’t last and within a day the index “closed the gap”. So much for that breakout.

But this retreat isn’t a surprise. Stocks were already at record highs and there wasn’t a lot of upside remaining no matter how good the news. But rather than get discouraged after seeing all of those gains evaporate, most owners refused to join the profit-taking and stocks quickly bounced after closing the gap. While investors were not prepared to chase stocks higher with reckless abandon, most didn’t want to sell their favorite stocks either.

And that leaves us where we find ourselves today. Somewhere between Friday’s 3,500ish close and Monday’s 3,650ish open. Support and resistance. Sometimes stocks refresh following a big rally by taking a step back. Other times stocks rest and recuperate by taking time off and grinding sideways for a bit.

As long as the S&P 500 remains between 3,500 and 3,650, expect the sideways grind to persist for a while. Break under support and we can short the market with a stop just above this level. If prices rally above resistance, that is also a buyable move. But as long as we stick between support and resistance, don’t expect much.

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