The S&P 500 slipped 0.6% as Congress moved toward resolving the debt ceiling crisis.
This negotiated compromise finally lifts the clouds that have been hanging over stocks for weeks. But as I wrote last week, anyone waiting to buy stocks after a debt deal was reached would find themselves a day late and a dollar short. And I further warned readers on Monday:
Of course, now that we are 100 points higher, the risk/reward flipped against us. The easy profits are behind us and we are more vulnerable at the upper end of the recent range. This is the time to be taking profits, not chasing an imaginary breakout.
Successful traders make money buying risk and selling safety. Last week was the time to buy the debt ceiling worry, and this week was the time to sell the debt ceiling relief. “Buy the rumor, sell the news” is as old as the stock market itself.
As for what comes next, ignore both the bulls and bears. We are not powering higher in a massive short squeeze the same way we are not tumbling back to the 2022 lows on a crumbling economy.
Anyone positioning for a big directional move in either direction is simply not paying attention. This is a choppy, sideways market with a slight upward bias. And now that we are falling into the slower summer months, this will only reinforce the market’s listlessness.
If every dip is going to bounce and every bounce is going to dip, money is made trading against these swings, not betting on their continuation. Until further notice, dips are buyable, and rips are sellable.
And just as important, take profits early and often because anyone holding a few days too long will watch their winners turn into losers.