The S&P 500 slipped 0.4% Monday, following last week’s big run to record highs.
Impressive earnings from market darling Nvidia Corporation (NASDAQ:NVDA) sent the index flying 105 points last Thursday, but so far, the index is struggling to add to those big gains in the follow-up sessions.
Too high, or not high enough? That’s the million-dollar question.
Both sides have compelling arguments. Few things are more powerful than momentum, and this rally is red-hot. But on the other side, all good things must come to an end and this rally is no different.
At this point, I give a very slight near-term edge to the bears. Not because I think this rally is topping but because savvy traders can enter a low-risk/high-reward short trade at current levels.
The market is pausing at 5,100, giving us a low-risk shorting opportunity with a stop near Friday’s intraday highs.
If momentum continues higher, we get stopped out for a small loss. On the other hand, a very vanilla pullback to 5k will produce profits of many multiples of that risk.
Low-risk, high-reward trades are what traders dream of, and here’s a good one.