So, right now, we are at a key point in the market for this year.  In the S&P 500, we are just below the 4200 level.  For your buy and hold stocks, you are probably feeling a lot better now than you did a couple of months ago.  Yes, there is pain in using the buy and hold method, but it is a very important part of a stock portfolio in my opinion.  In regard to your money that you use for the shorter term, you may be wondering which way the market is going to go right now.  You are not alone.

Recently, in June, the S&P rallied from the 2022 lows of 3636.  About a month later in July, it appeared that it was going to test that low.  It didn’t happen.  The lowest it got in July was 3710.  From there, it has been all gas and no brakes.  Earlier this week we almost touched 4200.  We didn’t make it.  What is interesting to me is that we came close to it, but it couldn’t touch that number.  As I write this, CPI just came out and sent the futures rallying.  Today may be the day.

I believe that 4200 is a key number for us right now.  The reason is that it is the nearest round number near a level of support and resistance.  For example, if you look back in late-February/early-March, you will see a level of support.  If you look in early June, that area is a point of resistance.  And now, it may be acting as a point of resistance again.  Once again, I do not believe that 4200 is the exact resistance level, but I do believe that it is the nearest round number that is near a level of resistance. 

Let’s take another step back.  The open for the year on the S&P was 4778. Even if we surpass the 4200 level, we still have a long road to go before we are positive on the year.  The fact that we are down on the year, tells us that we are in a weak market.  The key question that you need to ask yourself is if you believe that this market is strong enough to come back in 2022 on the heels of a selloff that is definitely significant.  On a greater scale, 4200 is still very much in the middle of things for the year.  We’ve had highs above 4800 and lows around 3600.  That is about a 1200 point range.

I would like to say in closing that I believe 4200 is a key number.  However, it is a key number in the middle of a lot of other key numbers.  When that happens, I’m not as bullish as I would normally be if I was trading a breakout (buying after a 4200 close).  So, as we see if there is going to be a breakout in the near term, I would say what I always say, and that is whatever you do, stay disciplined and manage your risk accordingly.  That is far more important than any market sentiment can ever be.

If you would like to discuss this article further, or have any questions on our services, feel free to email me at mtosaw@rcmfs.com.