It was a relatively quiet week for the S&P 500 as the index slipped a modest 1% over the last five trading sessions. What’s even more noteworthy is the minuscule size of the decline when you consider four of the last five sessions finished in the red.
These almost inconsequential down-days tells us there is very little selling pressure in the market. Given the size of the run from the November lows, quite predictably, we exhausted a huge chunk of demand. But on the flip side, very few owners are interested in locking in profits at these all-time highs.
This continues to be a very complacent market. Most equity owners are holding for higher prices and that keeps supply tight. While we always hear warnings about complacent markets, the thing the critics fail to mention is complacency can last a very, very long time before the fall.
No doubt this rally will end like all of the other rallies that came before it. But given how weak the selling pressure has been lately, this is clearly not that time.
The index very easily could slip and test 3,600 support or even 3,500. But until something dramatic changes investor sentiment, expect any dip to be modest and bounce quickly.
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Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.