Why smart money is still long this market

Free After-Hours Analysis: 

The S&P 500 added 0.4% Monday, closing at yet another 52-week record as high keeps getting even higher.

Things are good, really good. All of the worst-case scenarios have been avoided, and we actually find ourselves close to the best-case scenario. After scoffing at the idea even just a few months ago, many people are finally starting to think the Fed could nail the soft landing of taming inflation without tipping the economy into a recession.

While the above shift in sentiment is good for near-term stock prices, the more hopeful people feel, the more vulnerable we are to disappointment. That means over the near term, we should be trading in the direction of the trend, but we need to be wary of anything that could put the market back in a bad mood.

Cautiously optimistic is the name of the game.

While fear of heights is normal, when June’s wobble didn’t go anywhere, rather than get stubborn, we recognized the market didn’t want to go down, and that’s why we embraced this bounce. Smart traders don’t argue with the market. If this wants to go higher, then we have no choice but to follow its lead. The next pullback is coming, but it is not here yet, and that means we keep trading this from the long side.

Stick with what is working. That means holding this bounce with stops at least as high as our entry points. If this wanted to go down, it would have happened already.

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

If you find these posts useful, help me out 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