The S&P 500 exploded higher Monday morning following last week’s breakout through the psychologically significant 4k level. But this isn’t a surprise, as I wrote last week:
Never bet against a market that keeps making new highs. Until we start getting a series of lower-highs and lower-lows, this bull market is alive and well and there is only one way to trade this.
Most of the things cautious investors worry about are still hanging over us (COVID, rising interest rates, elevated unemployment, sky-high stock valuations, etc), but the stock market is no longer bothered by these things. This is normal as headlines eventually become priced in.
Nervous owners that fear these headlines sell to confident dip buyers who don’t mind the risks. After enough time passes, we exhaust the supply of fearful sellers and prices resume their climb. That’s exactly what happened here. The environment is not great, but we have definitely avoided the worst-case scenarios and less-bad is all we need to keep the rally going.
From a trading perspective, there is nothing to do other than stick with what has been working. I’m holding for higher prices and lifting my stops, now spread across the 3,900s.
We can argue with the market or we can profit from it. I choose profit every single time.
No doubt something will come along and rain on this parade (because it always does), but until we see a series of lower-highs and lower-lows, there is only one way to trade this.
The FAANG stocks finally turned it on and are helping propel the indexes to these record highs. Facebook (NASDAQ:FB) is back making record highs while Alphabet (NASDAQ:GOOGL) was already near all-time highs and keeps adding to them.
Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), and Netflix (NASDAQ:NFLX) are a little further back, but that is actually a good thing for us because that means these stocks have more profit potential during their recovery.
I really like FG and GOOGL, but right now, AMZN, AAPL, and NFLX are even more attractive.