Last week, I wrote a blog post titled: Two Reasons The Market Will Make New Highs Later This Year. I positioned myself for a move to the upside, but I certainly didn’t expect new highs in a week!!! As my good friend @ZorTrades says: Strong markets and strong stocks don’t give people time to get in. So now the question becomes, where do we go from here? Here are a few thoughts:
1) It looks like David Tepper will be right about the market going up +25% this year. He’s been one of the sharpest fund managers out there, so why go against him or the trend?
2) Will the move be straight up? Of course not. I’m sure the market will continue with its pattern of grinding up to frustrate the shorts, putting in shakeouts to convince everyone the move is over, and then grinding back up again. We will “back and fill” along the way, but a move to 1800 on the S&P 500 wouldn’t surprise me.
3) We could potentially exceed that target, especially because SO MANY PEOPLE STILL HATE THIS MARKET! Many traders I talk to are short, underinvested, angry, frustrated, etc. Many fund managers are underperforming this year and will be forced to cover and/or put money to work (if they haven’t started already).
4) There’s a school of traders out there that love to short everything that’s “extended”. While I respect many strategies, this particular one might continue to get people in trouble who love to fight the trend. It’s important to have a strategy, but even more important to know the right time to implement it. To think your strategy will work in EVERY market is foolish.
5) Another potential catalyst for the market could be an increase in M&A activity. We’ve seen very few takeovers lately, but I wouldn’t be surprised to see companies put some cash to work soon.
Am I turning into a raging bull? Absolutely not. I am simply listening to the tape. The market has been hit with higher interest rates, higher oil prices, political unrest in many parts of the world, and it still ignores everything and marches higher. My best advice is to shut out all this noise and focus on the price action of leading stocks, which is extremely telling right now. Doing this will increase your chances of staying on the right side of the market going forward. Good luck trading!
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