The S&P 500 has run up to new all-time highs. It closed at a record high of 2163 on Thursday and hit a new intraday high of 2169 even though it gave up a couple of points at the end of the day. The SPX blew through our target from last Friday of 2155.
The SPX is now up 8.5 percent since the post-Brexit selling. Interestingly, the Russell 2000 and the Nasdaq 100 are both below the 2015 highs. The VIX closed out the week at 12.67, the lowest since last August. It has fallen more than 50 percent from just after the Brexit. The market has continued to completely shrug off any and all bad news, including the awful attacks in France.
Going into next week there are diverging opinions among our traders.
Tony continues to be extremely bullish. “This is a major breakout higher on good volume with no top in sight. With interest rates at historically low levels there is no way you can be short.”
Henry is looking at possible downside but is being patient. “Obviously there’s been no point in calling a high in this market, but knowing we have timing for a correction today into Tuesday of next week had me cautious. We didn’t hold the first minor support and now I’m looking to 2156 as the next, most immediate level.”
David was looking at possible 20-point pullback in the S&P 500, but not one he was going to jump into. The larger trend is up and my entry allows me to sit through the expected pullback. I am sticking with my thoughts from early in the day: in expected third waves I want to be with the trend.
Chris thinks the S&P 500 needs “to calm down a little – it is extremely overbought”. He also pointed out the potential bearish indication in the Put/Call Ratio. Chris is emphasizing the importance of not just looking at one reason in his own blog today – “you need to have more than one reason to be long or short this market”.
The market has been amazingly resilient. We rarely get as bullish a week as we have had this week. We don’t know what next week will bring. But now it’s the weekend and time to take a break and recover. There is much talk these days about personal resilience and “grit”. They are incredibly important to have if you are a trader. But an interesting article this week in the Harvard Business Review (https://hbr.org/2016/06/resilience-is-about-how-you-recharge-not-how-you-endure) pointed out that resilience is not all about “tough”. It comes from recovery and recharging – so enjoy our weekend and take time to recover!
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This article was written by Simpler Trading’s Editor-in-Chief, Chris McKhann –
Chris McKhann has been involved professionally with the stock market for more than 15 years and specifically with derivatives for 12 of those. He started as a stock broker, but quickly moved on to options and futures trading. He spent some time as the Derivatives Product Manager for TD Ameritrade. He was the chief analyst and hedging strategist for OptionMonster. He has been an options trading educator and content provider for many years. His writing and analysis has been featured on Reuters, the Wall Street Journal, Forbes, TheStreet, CNBC and internationally. He has also designed and traded option and futures strategies for prop trading firms and hedge funds as well as managed accounts.