Don’t under estimate “less bad than feared”

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Monday’s intraday skid started the week off on the wrong foot, but Tuesday’s towering 2.8% gains erased all of those second thoughts and then some on our way to the highest close in over a month.

For as many negative headlines as there are swirling around us, stock investors don’t seem overly concerned. In fact, this seems to be a fairly bullish case of “less bad than feared”.

The economic data is awful, but everyone who fears these things sold months ago and those sellers were replaced by confident dip buyers. While our problems are a long way from getting solved, it seems the market is coming to terms with our new reality and recycling the same headlines is no longer enough to trigger another leg lower.

Tuesday’s close put the index above the 50dma for the first time since April. Maybe this breakthrough sticks or maybe we get turned back by it, but as close as we are to 4k resistance, the market rarely gets this close without at least challenging a widely followed level.

After we hit overhead resistance, it could be challenging to find new buyers and this latest rebound might start running out of momentum. But that’s a conversation for another day. In the meantime, for those of us sitting on a pile of profits, there is nothing to do but keep holding and lifting our trailing stops.

If this rally dies at resistance, we lock in profits at our trailing stops. If the rally continues through 4k, even better, we keep holding and lifting our stops.

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