It Has To Start Somewhere

Random Thoughts

There are no hard and fast rules when it comes to fundamentals. A stock might have great and growing earnings but can remain unchanged for years–“Fundamentals suggest what a stock should be doing. Technicals suggest what they ARE doing.” Richard Schabacker

There are some hard and fast rules when it comes to the charts. If a stock is going to go from 25 to 100, it will have to pass through 50 along the way. If a market is trending higher, it must make new highs.
Considering the above, the Ps closed at all-time highs. There’s no guarantee that they will stay there or continue higher but a new trend has to start somewhere.

Step one-new highs, accomplished. That brings us to step two, follow through.

The Rusty also closed at all-time highs.

And, the Quack managed to close at multi-year highs.

So, is this the all clear? Well, step two, follow through is key.

It does look like the indices are off to a good start.

My only concern is that the recovery is a “V” shaped on at high levels—the market sold off hard then went straight back up. When this occurs, the market is already overbought when it takes out its prior highs. There’s always something to worry about.

One day at a time.

So what do we do? Well, since new highs are crucial for an uptrend, you certainly don’t want to fight it. Therefore, continue to avoid any new shorts for now. On the long side, even though the market is banging out new highs, I’m not seeing many meaningful setups. This is perfectly normal since the methodology requires a pullback. Considering this, now is the time to enjoy the ride on any leftover longs that you have in your portfolio and wait before establishing any new positions. Don’t fret. If this is the start of something bigger, there will be plenty enough opportunities to get on board.

Best of luck with your trading today,

Dave