The senate just cleared the next stimulus package. It then goes to the House this coming week where it is expected to also clear. Major stock averages are likely to resume their uptrend barring a last minute gridlock in the House.

'We've shifted to a market that's being driven by liquidity and emotion instead of valuation. Once the market drops valuation as a benchmark, it has lost its rudder.'

In summary, it seems likely that support at 3700 and perhaps 3630 will be tested. As long as those hold, one could argue that SP-500 is trading in a very volatile manner within a relatively wide trading range. Resistance at 3930 and support at 3700 to be watched closely. There are signals on both sides and some oversold conditions are building. A breakout of that range in either direction should be significant and would have some serious follow-through.

What now?

In summary, the SP-500 chart has been "wounded" a bit by falling below the January highs and by the fact that there is considerable overhead resistance at 3900-3950. However, that is not a bull market "killer." It could trade between that resistance level and 3630 and remain in a neutral state.

Whether or not a choppy Friday in today's context yields a crash Monday call over the weekend remains to be seen. And, frankly, should not yet be a factor until we at least see the afternoon action.

Observe, don't analyze and see, don't think; the third Friday in February of 2020 and this third Friday in February of 2021. SP-500 chart showing lots of similarities. January high is now support area to watch. For now, the line of least resistance continues to be to the upside. Move up the stops daily and enjoy the ride.

Years ago, the great Sir John Templeton said, “The secret of my success is that I buy when everyone is selling, and I sell when everyone is buying.”

In the market, you can make excuses or you can make money, but you cannot make both.

What do you want ?

The challenge for anyone interested in making progress, when you know what you want, is to simultaneously have; 

A - the confidence to go after what you want

B - the humility to accept who you are right now

C - the willingness to build skills that bridge the gap between A and B

# 3 Attitude Changes Everything

There was a poor widow who had two sons. This widow's livelihood depended entirely upon her sons' meager little businesses because she was so weak and frail. Every day she worried about their businesses. She fretted and hoped that they would do well. 

One son sold umbrellas. So the mother would waken in the morning and the first thing she would look to see was if the sun was shining or if it looked like rain. If it was dark and cloudy she would gleefully say, "Oh, he will surely sell umbrellas today!" But if the sun was shining, she would be miserable all day, because she feared that nobody would buy her son's umbrellas.

The widow's other son sold fans. Every morning the poor widow would arise and look to the skies. If the sun was hidden and it looked like a rainy day, she would get very depressed and moan, "Nobody's going to buy my son's fans today."

No matter what the weather was , this poor old widow had something to fret about. If the sun was shining, she felt terrible because nobody would buy her son's umbrellas. If the sun was not shining and it was cloudy, she also felt terrible, because nobody would buy her other son's fans. With such an attitude she was bound to lose.

One day she ran into a friend who said, "Why, you've got it all wrong, my dear. There's no way you can lose. If the sun is shining, people will buy fans; if it rains, they'll buy umbrellas. You live off both of your sons. You cannot lose!" 

When that simple, obvious consciousness gripped her mood, she changed. From then on, she was happy woman the rest of her life.

In summary, all four major indices made new all-time intraday and closing highs this week. SP-500 should have support at the previous all-time highs near 3870. Below that, there is support at 3700, the January lows and the bottom of that brief selloff at the end of January, and then the important support level at 3630, the December lows.

 

What is a reversal top?

When an instrument makes a new 60+ day high, closes near the intraday low, then the next day, it closes lower than the prior day low on better than average volume, that is a reversal top. It typically brings a 10% correction when confirmed.

Note: RTY was going for it in the morning , trading below previous day low, but reversed mid. day, volume gave a hint.

Market bubbles happen all the time. What is important is what doesn't happen all the time, risk management, discipline and selling. If you do those things, it doesn't matter if we're in a bubble or not, you won't let your ego ruin you. Enjoy the ride, but don't forget raising your trailing stops.

In summary, institutional cash, which is often deployed heavily at the end of January and the beginning of February, came rushing into the market. In just four trading days, SP-500 had recovered all of the losses and had closed at a new all- time high. SP-500 bottomed out almost right at 3700 on Friday, January 29th, so that is support. There is also support below that, at 3630. That is the one that is more important, because a violation of that level would take the market below its December lows typically the sign of an emerging bear market. For now, the line of least resistance is to the upside, so stay long and enjoy the ride.

Stay alert.

"Focus."

Where to focus:

For the beginner, execution.

For the intermediate, strategy.

For the expert, mindset.

 

In summary, stocks have struggled this week, but the SP-500 has managed to remain above support and the chart is still bullish, and that is the most important indicator.

In summary, SP-500 remains positive, so bullish positions should continue to be held -- rolling up and/or raising trailing stops.

There is a lot of negative "noise," but all one really needs to know is that the chart of SP-500 (and the others) remains strongly positive. The first support level is at 3725-3750. Below there, the next support area is 3630-3650.

"History repeats itself, that's one of the things that's wrong with history.”

#2 - On a Journey.

You have been sent on a journey. You had no choice about when or where it started. You don't know when, where or how it will end. You have no map. All you know for sure is that it's bound to end sometime. There are rules that apply to this journey, but you've had to learn them as you go. And you cannot control them. You may not even know the purpose of the journey, even though others claim to know.

All you know that once started, you must continue every day, whether you feel like it or not. You start with no possessions, and when you finish you have to turn in all you have accumulated. In the end, say some, you will be rewarded or punished. But how do they know for sure? 

That's life, my friends, and you cannot change it. A little faith and a sense of humor, fortunately, help cushion some of the bumps. 

Years ago, the great Sir John Templeton said, “The secret of my success is that I buy when everyone is selling, and I sell when everyone is buying.”

Let’s consider the optimism that exists everywhere at the moment.

Today, optimism on the U.S. equity markets has rarely, if ever, been this bullish. Two words: “All in!”

Valuations are extremely high. Forward coming returns are likely flat to negative over the coming years.

If there was ever a Sir John “sell when everyone is buying” moment, it’s now. If there was ever a time to hedge, it’s now. Down 50% to 60% remains a real risk. We may go higher… the Fed may decide to step in and buy equities. Don’t know. That’s the bet. Stay on your toes and keep top of mind that faith was bestowed on both Greenspan and Bernanke also, and that bullish Fed narrative lasted until confidence was lost.

All bubbles eventually pop.