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The S&P 500 finished Monday 0.9% higher as the half-full outlook makes a comeback. While the banking crisis is far from being resolved, it isn’t spiraling out of control, and this weekend's less-worse-than-feared price action is enough to keep the sellers at bay.
More than simply cheering the helping hand given to struggling banks, some investors embrace this banking crisis as “bad news is good news.” This new wrinkle puts tremendous pressure on the Fed to slow rate hikes or risk turning this into a real crisis.
This remains a choppy market, and the next day’s down follows one day’s up. Monday’s bounce is much better than tumbling to fresh lows, but the coast is unclear, and we need to remain cautious. While we might avoid the worst, we are awfully close to the edge, and it won’t take much of a slip to send us flying off the cliff.
Governments and big banks are propping up their struggling peers. While that has slowed the deposit withdrawals, is it enough to end this crisis of confidence? While it looks promising, only time will tell, and we need to put a few more days of stability behind us. The problem with waiting for the all-clear is the good discounts will be gone by then.
I’m not happy buying this uncertainty, but the hardest trades often turn into our best trades. I’m nowhere near ready to celebrate Monday’s small bounce, but it is working. I remain cautious and will take profits early and often, but I’m willing to give this bounce the benefit of the doubt until it proves me wrong.
Start small, get in early, keep a nearby stop, and only add to a trade that’s working. And take those worthwhile profits when we have them because they won’t last long!
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