Huge Snapback – Trust But Verify
News this morning from President Trump on the Iran from saw a 180 degree turn in foreign markets and our pre-market trading. Now, the 1% loss looks like a 2% gain. And I am not sure I trust it. Like Ronald Reagan once famously said, “trust but verify”. I would much rather have preferred the big down open that forced investors to sell on the heels of the multi-trillion dollar options expiry on Friday. Then, a big rally could have ensued. But, as the Rolling Stones once famously sang, “you can’t always get what you want”.
On the plus side, the S&P 500 did breach the 6500 level on Friday which I have spoken about for weeks.
I usually find it tough to buy into a snapback rally from a low. I imagine that whatever fell the most will bounce the most today. And rallies often begin with strong short-covering. Let’s see where we are at the end of the day. I see a number of trades setting up over the coming days and weeks.
I want to reiterate the chart above which I show a lot. In late February, the NYSE A/D Line scored fresh, all-time highs. Bull markets typically do not end with such internal strength. That tells me as it did with the tariff tantrum a year ago that the bull market remains alive and new highs are coming after this pullback ends.
On Friday we bought TLT and more COMB. We sold RSP and ITB.
