The S&P 500 added 0.4% Thursday, ending a three-day skid that pulled the index off of 52-week highs.
We didn’t need bullish headlines to rally up to 4,400, and that means we don’t need bearish headlines to pull back from those highs either.
Stocks go up and stocks go down, that’s what they do. As much as people want to believe every headline matters and every movement is based on some fundamental driver, the simple truth is the market is like a toddler with ants in his pants and most of the time it moves enthusiastically for no reason at all.
That said, these reasonless moves are not random. Trends are more likely to continue than reverse, but eventually, every bit of up is followed by a bit of down.
Currently, the market finds itself at one of those tipping points where either momentum keeps pushing the indexes higher, or we’ve come far enough that it is time to start going in the other direction.
It’s been a great run from the March lows, but that also means we are getting close to the next down wave. While Thursday’s modest gains were a relief for bulls, the truth is, this 0.4% gain was anything but a decisive rebound.
Everyone knows stocks don’t move in straight lines and declines are littered with green days. The odds are good Thursday’s gains was nothing more than a little bounce on our way lower.
Now to be clear, I’m not a bear and I’m definitely not calling for a crash, but rallying 200 points from the start of June and 600 points in four months means the time for rest is close, if it is not already upon us.
I started shorting this market Friday and my stops have already been moved past my entry points, turning this into a low-risk/high-reward trade. There isn’t anything else do other than relax and let the profits come to me.
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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.