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We've seen the S&P 500 move back above 3,000 for the first time since late February. It's back above its 200-day moving average, too.
For the bulls, this is good news: The technical breakthrough creates another opportunity for stocks to move higher in the short term.
So, by all means, enjoy the long-side profits. Just don't turn your back on the market. Don't rush in unprotected. This market still demands respect from investors who have even bigger portfolios to defend now; it could turn vicious in a heartbeat.
Valuations have rocketed higher, but the economic risks of the coronavirus crisis remain constant; high unemployment and extreme economic uncertainty are all but certain to persist through the summer.
At the same time, the "money migration" that was sparked by that same technical breakout above 3,000 is now lifting the financials, travel, and, importantly, small-cap stocks, is also a signal that we'll likely waltz down the primrose path into an overextended, "overbought" situation in the market.
That means hedging is more important than ever. Now, I've talked before about "paying" a little for portfolio insurance every month; that's easy to do.
About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Strikepoint Trader and contributes to Money Morning as the Quant Analysis Specialist.