Stay bullish and buy dips in the S&P 500 because it will keep grinding higher, says this strategist
The S&P 500 was set to start Monday lower, coming down from fresh records reached on Friday after a bumpy week of trading on Wall Street.
That grind higher should continue, with the blue-chip index heading for more highs ahead, according to financial newsletter The Kobeissi Letter in our call of the day.
Published by Adam Kobeissi, the newsletter noted that the latest record was reached after “not the most eventful” week in terms of fundamentals — “but a lack of developments is generally bullish in a market with sentiment as bullish as it is.”
There are some minor bearish factors facing the S&P 500 SPX,
Looking past this, “we have the Fed’s continued supportive measures and record levels of investor optimism fueling the push higher for the S&P 500 and we expect it to continue,” said Kobeissi.
The index is using short term pullbacks — even of just 1% or 2% — to trap new short positions and force them to cover their shorts, ultimately buying back into the rally, the strategist said.
“This is why the steady grind higher has been proliferated and we also expect this to continue, meaning dips are great opportunities to increase long exposure in this market,” said Kobeissi.
The index just about touched 4,370 points on Friday, and, from a technical perspective, the group of strategists believes this move has momentum to push to 4,400 points before the next short-term pullback occurs.
“We have shifted back to a bullish outlook for the S&P 500,” said the strategist. “We continue to believe that shorting this market is a dangerous game and dips are readily buyable in these conditions.”
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