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Take Profits on an S&P 500 Close Below 1,643: Troccoli

Breakout

As is the case with grief, there are five stages of bull markets.

Stage one is residual fear of the prior bear market.

Stage two is denial that a bull market exists at all.

Stage three is anger at having missed out on enormous profits. This has been the most hated rally in market history since at least October of 2009. That qualifies as anger.

Stage 4 is when strangers ask me if it's too late to buy Tesla (TSLA). Last weekend the bull market entered Stage 4.

If you're still deciding whether or not to buy stocks it's safe to say you missed the bottom. What matters is where we go from here and how investors can dip a toe into stocks without feeling like the unwitting sucker at a high-stakes poker game.

In the attached video, Greg Troccoli, co-founder of ChartLabPro.com, suggests giving the market room to run but not without a backstop. Troccoli, who suggested stocks could be poised to rally when he joined Breakout in March, says the 1,700s aren't outside the realm of possibility now that resistance has been broken.

Related: The Last Resistance Level Before a Major S&P 500 Breakout

Troccoli is a technician; he takes the stages of bull markets and all other emotion out of the equation and lets the charts guide him. Right now he's dispassionately rolling up his stops to avoid giving back his gains. At the moment Troccoli's sell signal is a close below support on the S&P 500."If we close back below 1,643 then I'm take some serious profits because you could come off another 50 or 60 points," he cautions. Unless and until that happens he's simply moving his stop loss level higher as the market rallies. It's not sexy and the strategy may seem crude but the intellectuals haven't been in stocks since at least 2008.

This late in a rally the best strategy for those already long is to stick around and take precautions against being involved in Stage 5 of a bull market: the point at which it ends in tears.

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