How much longer will 4,100 support hold?

Free After-Hours Analysis: 

The S&P 500 finished Monday 0.3% higher and remains above 4,100 support for the sixth session in a row.

While that sounds like a decent result, open the intraday chart and the situation looks a lot less encouraging. This is the second day in a row the index finished at the intraday lows and the fourth time that’s happened out of the last five sessions.

As I often remind readers, it’s not how we start but how we finish that matters most. While Monday finished in the green, that 0.3% close was well under the morning’s highs. The index popped 1.3% in early trade, buyers disappeared, and we finished at the intraday lows. That’s as ugly as it gets for a day that technically finishes green.

The index is still a handful of points above 4,100 support, but at this rate, a violation is all but inevitable.

I still think May’s rebound has the potential to challenge 4,300 over the next few weeks, but we need to tread carefully over the next few days. The market is far stronger than any of us and it doesn’t care what we think. If it wants to dip under 4,100 and retest 4k support, who am I to argue with it? I will gladly take profits near 4,100 and wait to buy the next bounce.

While my stops are spread under 4,100 support and they didn’t get violated by Monday’s late retreat, the weak closing price action convinced me to start peeling off some profits proactively. Buying back in is always a lot easier than praying the market bounces back to the levels I wish I sold at.

I shifted to a defensive posture and took some profits but I only peeled off a partial position. Rather than lurch all-in and all-out of the market, I like hedging my bets by moving in partial positions. If the index tumbles Tuesday, I took some profits at higher prices and have those funds safely in my pocket. On the other hand, if the index bounces back Tuesday, I’m still holding a partial position and can put the rest of my money back in. That’s a win-win in my book.

Sign up for my FREE email alerts so you don’t miss the market’s next big move

If you find these posts useful, please return the favor by liking and sharing them!

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.

What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours

Follow Jani on Twitter @crackedmarket