Tuesday was another “do-nothing” session for the S&P 500. The index slipped 0.2% and this continues the trend of inconsequential tenth-of-a-percent moves near record highs.
Two steps forward, one step back. This is a very boring market, but lucky for us, boring is almost always bullish. As long as we keep getting more up than down, everything is going according to plan.
There have been countless economic data points released over the last few months and the market is taking a half-full attitude toward all of them. Fear-mongering is not spooking investors and as long as the government’s free money keeps flowing, expect stocks to continue grinding away at record highs.
While many of these issues (namely inflation) might come back to haunt us, we trade the price action and as long as the market doesn’t care about these things, then we don’t care about them. If something changes, it will show up in the price action and that is when we will reevaluate our outlook. Until then, ignore the chatter.
Complacency often proceeds the fall. The problem with trading this way is periods of complacency last a long, long time. Anyone who sold the absurd complacency at 3,600, 3,800, or 4k is no doubt kicking themselves for being too hasty.
Savvy traders take their cues from the market, not their intuition. While the cynics might eventually be right, they will be wrong for a long, long time before that happens.
High tends to get even higher and that is exactly what is going on here. Keep holding for higher prices until the market gives us a reason not to.
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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.