Tuesday was another sideways session for the S&P 500. But for a market as “overpriced” as this one, anything that’s not down is actually constructive.
High and keeps getting higher—that’s the theme since the November elections. While everyone knows this cannot last forever, a trend is far more likely to continue than reverse.
While I’ve been cautious since the 4k breakout, last week’s dip was the perfect bearish setup. If this market was fragile and vulnerable to a collapse, there was more than enough to send stocks into a tailspin. Instead, most owners kept holding for higher prices and the selling stalled nearly as soon as it got started.
Conventional wisdom tells us to fear complacent markets. What most prognosticators leave out is periods of complacency last a long, long time. No doubt the cynics will be right…eventually. But they will be wrong for a long time before that happens.
This market is trading well and there is no reason to fight what is working. Keep holding for higher prices with stops spread across the lower 4,100s. The market will tell us when it is getting ready to pull back, and this is not that time.
Tesla (NASDAQ:TSLA) posted all kinds of records in its latest earnings report. But for a stock whose P/E includes a comma, new records are not good enough. Investors were disappointed and the stock skidded more than 4%, resting just above the critically important $700 level.
A bounce off of $700 and all is fine, the good times keep rolling. Fall under $700 and that risks triggering a larger wave of profit-taking.
With as much air as there is underneath this stock, it could get ugly if momentum starts escaping. Violate support and I’d much rather lock in my profits than hold this one all the way down.