A simple trading plan going into year-end

Free After-Hours Analysis: 

The S&P 500 slipped into the red Tuesday morning, but rather than accelerate lower, the index turned around and finished the day up a quarter percent.

Equity owners are “fat, dumb, and happy” and ignoring every reason to sell. When stubborn owners refuse to sell, it doesn’t matter what the “experts” think the market should be doing.

Sentiment continues to be half-full and every dip bounces within hours. We are quickly approaching the final weeks of the year. If institutional money managers wanted to make major portfolio adjustments based on last month’s election or the latest Covid flareup, they have already done it. With all of those big trades behind us, we are setting up for a fairly quiet coast into year-end.

If equities were grossly overbought and set up for a collapse, there have been more than enough bearish headlines to trigger that collapse. The simple fact we are still standing near the highs confirms this is a strong market, not a weak one.

While it is easy to criticize this strength, the harder trade is usually the right trade. Everyone knows stocks should not be trading at record highs in the middle of a pandemic, but that’s exactly what they are doing. Rather than fight this strength, I’m riding this wave and only fools are fighting it.

Keep following this bounce higher with a trailing stop and see where it takes us.

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