S&P 500 Up 6% In July: Is It Time To Buy?

S&P 500 Up 6% In July: Is It Time To Buy?

When to start buying into the stock market is the question everyone is asking, yet how many people have a definitive answer. 

Go online, and it is nothing short of mayhem. The blind advising the blind is not surprising, given that financial illiteracy is a wide-ranging problem that gets no mainstream media attention. 

Those investors holding stocks like PayPal Holdings Inc PYPL will have learned that stock investing is not just a case of "holding for the long-term." It is an amateur approach. Knowing when to exit a stock is arguably more important than the entry. 

The S&P 500 has increased almost 6% since the start of the month, with many self-proclaimed experts calling it a bottom. You will do well to ignore this.

Below is the daily timeframe. 

Signs to suggest we are in a bull reversal. 

  • The price in the last five trading days has closed above the 20-day simple moving average (sma) and the 50sma for the first time since March.

Signs to suggest this is a bullish pullback before a continuation to the downside. 

The price is finding resistance at the $4000 level. 

The price moving above the 20sma and the 50sma is a vital sign of a reversal back to the upside. Add to that the price is still trading above last year's low and the weekly 200sma, and you have a strong argument for a bottom. 

However, with the $4000 round number acting as resistance and the price still trading below the daily 200sma, I will continue to apply patience as both of these levels have the potential to give the momentum back to the bears. 

The beauty of charts is that you are dealing with the asset's price, which ultimately is the source of truth. It removes opinions, including your own.

Ignoring opinions is one of the golden rules of investing.  

If the price closes above the $4000 round number by the end of trading on Friday, we have further confirmation of a bottom. However, once the price confirms a break and close above the daily 200sma, I will consider buying back into the stock market. 

This will present a high-probability environment when I use a simple scanning and analyzing process to filter for stocks outperforming the indices. 

Also Read: Tesla Short Sellers Take $1B Hit, 'Short Squeeze Hell' Could Be Coming

The best of these stocks will make it into my portfolio, and I will accelerate the profit phase through holding and compounding. 

Good investing is simple, but don't underestimate the level of sophistication it takes to get to this stage. All endeavors have a learning phase, and stock investing/trading is no different. 

Those who put in the time will be handsomely rewarded. Those who don't will remain part of the social media mayhem and have nothing but regret later in life. 

The choice is yours. 

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