The S&P 500 finished Monday modestly higher and it eeked out another record close.
The index got within a few points of the psychologically significant 4,200 level. We long since passed meaningful resistance levels because virtually everyone holding stocks is sitting on a pile of profits. That means we don’t have conventional overhead supply coming from regretful sellers looking to get out at breakeven.
Instead, we are stuck with hesitant buyers who regret not buying at lower levels. Chase or be left behind is the torment of anyone sitting in cash. But so far, most buyers are keeping their cool and not chasing prices higher with reckless abandon. That more thoughtful approach is leading to this methodical grind higher.
As long as bearish headlines cannot take us down, the only direction left is up. While this rally cannot last forever, or even much longer for that matter, it is acting well enough right now to earn our continued support.
Maybe the rally will stall after cresting 4,200, but so far it isn’t giving any warning signs. We will evaluate the market’s behavior after the 4,200 breakout when (if) it happens.
This rally will run out of steam at some point, but this is not that point. Until then, stick with what has been working and that is holding for higher prices. (And following this rally higher with a trailing stop.)
TSLA is consolidating above $700 support/resistance.
This is turning into one of those half-full or half-empty situations depending on your outlook. Either this is resting before the next push higher, or it is stalling before the next leg lower.
Fortunately, as opportunistic traders, we don’t come to this with an agenda we need to justify and instead are trading this based on what the stock does next.
Ignore the rabid fandom and buy the bounce or short the breakdown. It doesn’t get any more straightforward than that. $700 is the line in the sand. The stock is ownable above this level and it is shortable under it.
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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.