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The Stock Market Has Earned a Breather


Following the huge run in the market over the past few weeks, we could see some downward or sideways action.

For the last few days, we have urged caution after the big move up the S&P 500. In early August, buyers returned after a shallow and healthy 4.3% pullback, and the market spent the subsequent 3.5 weeks going virtually straight up. 

Up here, the market looks a little tired and is way overdue for a pullback before resuming its very strong uptrend.

Remember, our job is to help you navigate the market and keep you ahead of the crowd. This is the last full trading week for the month and we have to expect some profit-taking to come in. Our discipline requires us to be patient and not chase the market as it is now up nearly 5% in less than 4 weeks.

Remember, in the pre-QE days, a 10% gain for an entire year was considered healthy. So a 5% gain in such a short time frame is a big move and the market has earned the right to pull back a bit to catch its breath. We are cognizant of the fact that the market is in melt-up mode, and volatility surprises in this type of environment remain on the "upside", not the downside. 

We are likely to see the market move a bit lower, or sideways to consolidate the move. So far, the latter scenario is occurring and that is the more bullish scenario.

Twitter: @AdamSarhan
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