This Old Market Adage Is Good Advice for Current Investors
Even the most compelling bearish arguments are likely to be ignored until a shift occurs.
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A buying spree in the last hour of trading turned a mediocre day into a solid one for the S&P 500. The action was choppy early in the day with the Magnificent Seven MAGS lagging and the Russell 2000 IWM leading. The strength in smaller stocks helped to drive solid breadth of two to one positive. Over 1,000 stocks hit new 12-month highs.
This action is a good example of how strong markets stay sticky to the upside. Shallow dips are quickly bought by underinvested bulls that don’t want to chase strength, and stubborn bears are forced to keep repositioning to avoid too much pain.
As is typical, there are plenty of good reasons to call for a market top, but price action is the only thing that ultimately matters. This market is not going to listen to even the most compelling bearish arguments until there is a shift in the momentum. It is the price action that drives the characterization of the news, not the other way around.
There isn’t much major news flow due immediately, and there is the positive seasonality in front of the July 4 holiday to provide support. There is some talk about a flood of trade deals coming before the July 9 deadline, and also a jobs report on Thursday morning, but there is not a big event that is likely to shake things up. While the budget bill is receiving plenty of coverage, it doesn’t appear to be having much market impact.
There is an old market saying — "stay with the trend until it ends"— which appears to be pretty good advice. That doesn’t help much if you are looking to make some buys, but trying to call a top is not working at all.
Have a good evening. I’ll see you Tuesday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
