The S&P 500 started Tuesday’s session in the red after the inflation reading came in somewhat elevated at 3.1%.
But it didn’t take long for buyers to show up and push the index into the green. By the close, the S&P 500 added another 0.5%, and the slow-motion breakout above 4,600 resistance continued.
Weak opens and strong closes are typical of bull markets. We consumed a whole lot of upside getting to these levels, meaning slower times are ahead. It is hard to get excited about these small gains, but as long as we keep getting more up than down, there is only one way to trade this.
The Santa Clause rally arrived early this year, and stocks are slowly drifting higher this week. No one is getting rich from these few tenth-of-a-percent rallies, but when you add them up, they turn into real money.
I’m not expecting a big short squeeze from this 4,600 breakout, but enough shorts are getting squeezed to give us this near-term lift. As slow and boring as this feels, the slower it goes, the more sustainable it is.
While the market looks good, this is the tipping point where we shift our mindset from offense to defense. I’m not expecting a lot of upside, meaning I plan on collecting profits relatively quickly. I’m not selling right now, but I already have my eyes on the exit.
My stops have already been lifted to my entry points, turning this into a low-risk trade. I’m not ready to pull the rip cord just yet, but that day is coming.
If we continue with a string of up days, I will start collecting some partial profits in the back half of the week.