The S&P500 finally scored an official new all time high today after weeks of hanging out just below the previous all time high of 1,576. I’m glad I haven’t been playing this market this week because I would not have been benefiting from a move to all time highs I know that much. I’m a little concerned that the market was willing to run up so much in 3 days, when the major earnings reports still haven’t been revealed. Even more concerning to me is that the Russell 2000 is still below 950, but it is a lot closer to that level today.
While I’m concerned and skeptical of this move this week I’m not shorting it. I’d rather wait for a second move down in order to confirm that a pullback is finally under way. What I mean by second move, is the direction the market goes after a decent move lower. In my opinion, there have been three “first moves” lower so far this year: 2/20-2/25, 3/15-3/19, & 4/3-4/5. None of those moves resulted in a “second move” lower though. Instead they were all just higher lows, on the way to new all time highs.
So what may signal that a second move is on the horizon? Well here’s something you probably didn’t know:
SPY (the ETF that tracks the S&P500) hasn’t had one single 3 day stretch this year where it closes below its opening price
True, there was a 3 day losing streak from 3/15-3/19, but on the second day of that streak (3/18) SPY closed higher than where it opened, showing strength from an initial gap down. A second move isn’t going to materialize if there are buyers on dips, and when SPY is able to gap down but yet finish above the open it signifies that there is enough demand to absorb the supply coming out. Therefore, I’m waiting for a stretch where SPY closes below its opening price 3 days in a row before putting on my bear suit.
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