Today's stock rally is the kind that's almost impossible to explain to "civilians." Non-traders are going to say the jobs number, the Fed or some European event sparked this rally. They will be wrong.
The jobs number was too good to trigger QE and too weak to claim we're in a recovery. If anything it should have marked a little selling.
Europe is lousy. Only God knows who's in charge over there, and the Good Lord is keeping it a secret. Foreign stocks were having a HUGE day when the U.S. woke up but they don't have a particular reason to rally, either.
Stocks are higher for two reasons. 1) A ton of money got caught short or underinvested and 2) The market held support yesterday at 1,360 and actually staged a nice comeback into the close.
Anybody who gives you a fancier explanation than that is either filling airtime or wrong. The distinction doesn't matter.
Here is a chart I posted on Twitter on Thursday:
As a rule, when stocks pull back to a trendline, you buy with a tight stop. It's like splitting 8's in blackjack. You just do it. What I did instead was watch Olympic swimming. That was a bad decision.
I posted a chart on Twitter on Thursday.
Here's where we are today:
The imaginary rule book says:
- Don't chase.
- Don't assume stocks are breaking out. 1,400 is the level.
- Make sales into strength. What's "strength"?
- Get rid of anything not going higher; if it can't rally today, it's not going to rally at all.
One last thing: Everything you read goes straight out the window if something truly noteworthy happens with the fundamental picture. Charts are just one part of a big picture.
For the record, I'm long stocks (though not enough). I have no short positions of any sort. I'm not giving you advice, just telling how I see it.