7400 is here and now the next stop is 7500. At the current trajectory, this should be hit by early next week. SPX continues to pump with very little hesitation and is seemingly reaching new highs on a daily basis now. The Nasdaq is on an entirely different level, going nearly parabolic these past few weeks.

This was another week where we broke the upper end of the expected move, with SPX having over a 1.5 standard deviation move. Over the past month and a half or so, we have had a lot of breaches to the upside on SPX. Meanwhile on the Nasdaq, it seems that we are breaching the upper end of the expected move every single week.

When the market keeps breaking expected moves like this, we classify it as an inefficient marketplace. Implied volatility is way off the mark, severely underestimating the expected moves. Realized volatility has far surpassed implied volatility for nearly 2 months now, which in itself is rare – but what’s even more rare is that all the breaches are to the upside.

We are experiencing an upside “crash”

The daily chart is a straight line higher and looks ridiculous.

As much as we want to hate this price action though, it is the reality that we live in and being bullish is the only answer. No one knows when or where this will end, so the play is either be bullish or don’t trade at all.

Just like when the market is crashing, people always say “don’t try to catch a falling knife”, I suppose the opposite is true here in that “don’t try to stand in front of a runaway train”

The major difference is that with a crashing market, you can always average into things and prepare for the eventual up move. With an upside runaway train like this, you can’t really average into any short positions.

One observation from the above daily chat is that once SPX broke 6000 last June, we never saw it again. We are now at 7400. Is it possible that we don’t see 7000 again? Perhaps this rally goes all the way to 7800-8000, and then we get a 10% correction to 7200? Even 6200 was never retested.

There is a lot to think about over the weekend, but I think it’s important to understand the reality of this market. It is going higher and will likely continue to go higher unless there is a catalyst. Isaac Newton’s first law of motion states: “an object in motion remains in motion at a constant speed and in a straight line unless acted on by an unbalanced force”

Unless there is some catalyst or horrible news, this is likely to continue. If there is a dip, buy it.

I will have more over the weekend as we look ahead to next week, the “expected” move and other key levels.

Stay tuned!