The S&P 500 has jammed up into 2800, which is the major resistance level from this past quarter.
Everyone, and I mean EVERYONE is focused on it.
If this were a textbook, sellers would show up and the market would take out 2750 in short order.
But this isn't a textbook. It gets messier than that.
It's different this time. Late last year, whenever the market hit that level, it was met with swift rejection and an increase in volatility.
What are we seeing now? A slow, grinding move sideways without any sellers showing up.
Price is being accepted. And when price is being accepted, there is a tendency for the market to auction further in the direction of the market trend.
This makes sense. During the swift correction in December, a LOT of investors sold their stock. That means inventory was significantly reduced and the supply that existed at higher prices is gone.
The market is running higher not because of a bunch of pent-up demand, but because there's no inventory supply to sell at these prices.
And if there is no supply, price must auction higher to find new supply.
I want 2800 to hold. I want some kind of reversion and a pullback because that will provide setups that I'm more comfortable with. But options trading isn't about comfort.
Think about this... what move in the market would make people more comfortable? A crack above these levels? I don't think so. Nobody's really happy about this market rally. Everyone is looking for a pullback.
The pain, it seems, is to the upside.
We could end up seeing textbook resistance hold. Yet a more feasible situation would be something like this:
A failed breakout above 2800 would be much more characteristic of how this market trades. You get a move higher to force a bunch of buy stops, then take out 2800 again, this time from the upside, to establish a new trading range.
This isn't some call for a market crash. It would take a LOT of work and a move back under 2600 for a proper downtrend to setup.
The breadth is incredibly strong, and I'm buying any kind of dip in stocks.
If the dip manages to come.