This Rally Has Far To Go – Look For Early Low Today and Strength Late
POSTED BY PETE STOLCERS ON FEBRUARY 16
The market is screaming higher and you should raise your stops. We are up almost 200 S&P points from our entry point last week and I don’t want to give it back. Use SPY $271.80 as an intraday stop. The momentum is strong and I don’t believe we will be stopped out today.
The market momentum is strong and I believe it will sling shot to a new high before this move is over. That might take a couple of months and I believe the March FOMC statement (3/31) will keep the old high in place.
A week ago most analysts were clamoring about higher interest rates and how this was going to end the bull market. Since then we’ve seen “hot” inflation numbers, a decline in bonds (higher yields) and a market that is racing higher. I told you that rising interest rates are not an issue when accompanied by economic growth. I also told you that yields are near historic lows and they have lots of room to run before they impede growth.
The drop was caused by extreme bullish sentiment. Once the washout started sell programs kicked in. Some traders will demand that the SEC curb trading programs to reduce volatility, but not me. This was one of the best weeks I have had as a trader in 30 years.
Rising wages are fantastic, yet some analysts found a way to give this a negative spin. We have been waiting for this for more than a decade. When workers have more money they spend more and they invest more. Federal tax revenues also rise.
Earnings growth is robust and we are in the beginning stages of an economic boom.
Many investors will look back at last Friday and get themselves for missing the opportunity of the year, but not us.
In my video I discussed the power of stock buybacks. Since the beginning of the year companies have announced $170 billion in stock buybacks. That alone has pushed the market higher the last 20 years and it provides a safety net.
Swing traders need to stay long. You can expect a SMALL retracement at some stage in the next couple of weeks. It will be brief and shallow. Raise your stop as the market rallies. The strength and momentum this week tell me that the market has a long way to go and that this rally is not even close to ending. We will be prudent and preserve our gains. If we do get flushed out we will look for another entry point.
Day traders need to be cautious on the open. Let the bid establish itself for the first 30 minutes. We run hard and we should see soft price action early in the day. Once support is established buy stocks with relative strength.
Stay long and look for more strength next week.
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