This Breakout Could Take Stocks Even Higher
Yesterday the S&P 500 joined the NASDAQ and closed at all-time highs. The losses suffered in February and March of this year have officially been erased.
No one expected this to happen but I did write this back on March 22nd, one day before stocks bottomed:
It seems to me that everyone has capitulated or come to terms that this situation will extend well into the summer or fall and possibly even longer.
What I haven't heard is anyone accepting the "possibility" that this situation passes quicker than most people think. For some reason, the "surprisingly quick resolution" has been totally left out.
If I've learned anything in the last twenty years investing in bull and bear markets is to never forget that anything is possible. Just like how this sell-off happened at record speed, it could also recover much quicker than most people think.
The unexpected has happened and stocks are back above the February highs. This has happened in the face of increasing COVID-19 numbers, record unemployment, and continued restrictions on travel and social gatherings. This rally continues to defy logic and surprise even the most staunch bull.
But, if you've been observing the price action of the major indices and minimizing your intake of noise, I mean news, its been very obvious. Stocks are going up. All the major indices continue to trade above their short term moving averages and the VIX continues to trade in the low 20's. What's bearish about that?
Yesterday we saw Amazon (AMZN) breakout and close at all-time highs moving higher by 4% on the day. Facebook (FB) and Alphabet (GOOGL) look like they are about to do the same. We all know that when FAANMG rallies it takes the entire market with it and right now that's exactly what we are seeing. FAANMG is breaking out.
Maybe stocks stall out here and pullback. Maybe they continue to rally attracting fresh buyers. No one knows for sure. But I do know that the trend is up and aligning your trades with the overall market increases your probability of making money.
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