Stocks are “back in the box,” essentially flat for now. This sideways motion is a little disappointing, because I for one was hoping for a nice pile-on close to 20,000 that would have sent us on another leg higher.
I’m sure we’ll get there eventually. Right now it’s cabinet confirmation time; markets are sitting back and watching the show.
[ad#Google Adsense 336×280-IA]But so far, nobody and nothing has been able to rattle the market.
Every time stocks look like they’ve grown tired of trying to climb higher or look like they may even be struggling a little to stay flat, they catch a bid and hang tough.
I think that’s a very good sign, but that doesn’t mean there’s nothing to do…
Why I Think the Markets Will Move Higher
When you consider the improving strength of the economy and mood of investors alongside prospects for future growth and wealth generation, the markets’ path of least resistance is: up.
There’s not much above our heads but thin blue air right now, and I’d say anyone who says otherwise just isn’t reading it right.
Besides, if we were really positioned for any kind of significant move to the downside, we would have seen a couple of back-to-back drops amounting to one or two percent. That’s what it looks like when there’s a “bid” under the market, and of course that hasn’t happened.
Instead, we’re hanging out in a strip of a no-man’s land until we get more clarity on the Trump Train.
No problem. There’s an old traders’ adage that says “the trend is your friend,” even if that trend just isn’t doing much at the moment.
Still, it’s never wise to discount altogether the possibility something (likely news or some event happening outside the United States) could shake bullish confidence.
But that event would almost by definition have to be a “Dinosaur Killer,” with an extraordinarily heavy impact, and I’m having an awfully hard time imagining what that might be.
U.S. consumer confidence reported last week is just barely off 13-year highs. Investor sentiment is right there with it on the top shelf – CNN Money’s Fear & Greed Index sits firmly in “Greed” territory. These are not signs of skittish or fragile weakness.
So we’re left with “the trend is your friend,” and this trend is telling me to get ready, to hang loose and paddle around gently until the next wave starts to shape up.
Let me show you what that means.
Take a Mildly Defensive Posture Now
Even when times are “boring,” there’s always a move to make.
There’s no need to be greedy or tempt fate right now – things are good, the next leg up is coming. It will get here; it’s just a question of when, and I want everyone to be set to make as much money as possible.
I don’t see any reason to touch positions with lots more upside potential right now. Let them run.
But if you’ve got a trade or holding that you feel has profited enough but might be good for another, say, 3% or 5%, consider taking some of your money off the table to bank it and limit your downside exposure.
I like tightening up stops at a time like this, too, to protect gains from that possible bolt from the blue I mentioned, or something happening during the transition and confirmations.
But all indications are the next few weeks are going to be really profitable for all of us.
— Shah Gilani
Source: Money Morning