Category Archives for "End of Day Analysis"

Why bulls shouldn’t be getting cocky

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 smashed through 4,800 resistance on Friday, adding 1.2% and sending bears scrambling for cover.

Does this mean the 2024 consolidation is already over? Nope. As I wrote Thursday evening, this breakout was expected, and it doesn’t change anything:

This 4,700/4,800 trading range is too tight to contain for much longer, but that doesn’t mean the next directional move is coming. Instead, the first few times we break out of this range, that move will stall and reverse as the consolidation simply looks for more elbow room between its swings. Continue anticipating reversals until we have a compelling reason to do otherwise.

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Just because the market broke out of an ultra-tight, 100-point trading range doesn’t mean the recent consolidation is over. Stocks spend 60% of their time chopping sideways, so the odds are good Friday’s breakout was nothing more than a somewhat wider continuation of the recent sideways chop.

Friday’s breakout was definitely buyable because it was going to trigger a short squeeze, which is why I bought it, but savvy traders are already planning their exit, not pressing their luck. The odds are very good we are not done with 4,700 support yet, and we will be retesting that level over the next few weeks.

Just as has been the case since early December, anyone holding too long will watch their nice profits evaporate during the next swing. Don’t be that guy. Remember, we only make money when we sell our winners, and it won’t be long before savvy traders are collecting these 4,800 breakout profits.

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Don’t make the costly mistake everyone else is making

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 b0unced back on Thursday, gaining 0.9%, easily erasing this week’s selling.

Last week, bulls were pilling in ahead of their widely predicted 4,800 breakout. This week bears were patting themselves on the back for shorting the next big breakdown. And as luck would have it, both sides got their trades exactly wrong. But what should one expect when making directional trades in a sideways market?

Luckily, readers of this blog saw this sideways meat grinder coming and resisted the urge to overtrade it. As I wrote two weeks ago:

If this market was overbought and vulnerable, [January 9th’s] opening losses were the perfect opportunity for bears to strike by opening the selling floodgates. Instead, most owners saw [January 9th’s] early losses, shrugged, and kept holding. That caused supply to dry up and prices to bounce.

We’ve come a long way from the October lows, and the market deserves a well-earned break. I’m not expecting a surge past 4,800 anytime soon and the market is settling in for a sideways grind under 4,800 resistance.

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Here we are, nearly two weeks later, and that’s exactly what happened. Markets spend 60% of their time trading sideways, yet that doesn’t stop everyone from predicting the next big directional move is just around the corner.

Not much is happening in the financial headlines, and these daily moves are nothing more than the market’s inability to sit still. The market does something every day, but these daily moves don’t mean anything, and the index is simply consolidating last year’s big gains by grinding sideways for a bit.

This will change at some point, but this is not that point, so we need to keep expectations low and anticipate more sideway chop for the foreseeable future. If prices were going to surge higher, they would have surged by now. If they were going to collapse, they would have collapsed. The fact we are doing nothing tells us the market doesn’t want to do anything.

This 4,700/4,800 trading range is too tight to contain for much longer, but that doesn’t mean the next directional move is coming. Instead, the first few times we break out of this range, that move will stall and reverse as the consolidation simply looks for more elbow room between its swings. Continue anticipating reversals until we have a compelling reason to do otherwise.

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The mistake bulls and bears keep making, part 2

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slipped another half percent on Monday as 4,800 resistance remains an impenetrable barrier.

Days of up followed by days of down sounds like a trading range to me. Luckily for readers, this is exactly what I forecast in last week’s Free Analysis:

Bulls and bears are jumping all over these gyrations that confirm their biases, only to have those trades blow up in their faces a few hours later. This market is entering a consolidation phase, and it will be a while before we get the next big, directional move. Keep that in mind the next time you are planning a trade.

In range-bound markets, we trade the reversals; we don’t bet on the continuations. Until the market decisively breaks out of the 4,700/4,800 trading range, be prepared for a lot more sideways chop.

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Trading ranges look seductively easy to trade in hindsight, but it is impossible to overstate the difficulty of standing your ground when it feels like the market is moving against you. This is one of those times where, if you wait long enough, both Bulls’ and Bears’ trades will show a profit. Unfortunately, it is never that easy. Instead, both sides lose their nerve and bailout for a loss before the profits show up. Buy high, sell low, repeat until broke.

Remember, successful trading isn’t about big winners. Everyone gets those. It is about keeping those profits in the follow-up trades, which is why I’m not anxious to press my luck here. Maybe we get a nice buyable bounce later this week, but with the market switching direction every day or two, it takes impeccable timing to get these trades exactly right, so be careful chasing these nickels and dimes. It would be a shame to allow haste and greed to cause us to give up our big pile of profits by irresponsibly overtrading this sideways chop.

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The mistake both bulls and bears keep making

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Thursday’s session pretty much where it started. But as quaint as that flat finish sounds, getting there was anything but a smooth ride.

Before the open, we got December’s CPI report showing inflation picked up a small amount from November. While not terrible, it leaves inflation above the Fed’s target and hints that rate cuts might not arrive as quickly as some investors hoped.

After opening with small gains, the selling hit hard, and the index shed nearly 60 points over a few hours. But when it looked like another big wave of selling was knocking us back to the January lows, supply dried up, and prices bounced.

Luckily, this sideways chop under 4,800 resistance doesn’t surprise regular readers. As I wrote in my Free Analysis Tuesday:

We’ve come a long way from the October lows, and the market deserves a well-earned break. I’m not expecting a surge past 4,800 anytime soon and the market is settling in for a sideways grind under 4,800 resistance. But as long as we keep getting more up than down, this is a better place to be owning stocks than it is to be shorting them.

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As luck would have it, we hit our head on 4,800 resistance and turned back. But equally expected was another aborted selloff that didn’t go anywhere.

Bulls and bears are jumping all over these gyrations that confirm their biases, only to have those trades blow up in their faces a few hours later. This market is entering a consolidation phase, and it will be a while before we get the next big, directional move. Keep that in mind the next time you are planning a trade.

In range-bound markets, we trade the reversals; we don’t bet on the continuations. Until the market decisively breaks out of the 4,700/4,800 trading range, be prepared for a lot more sideways chop.

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Why this rebound earned the benefit of the doubt

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slipped less than 0.2% Tuesday.

While a loss is a loss, this small give-back actually looks bullish for two reasons. First, we opened the session with much larger losses, and the market spent all morning climbing back from those opening lows. Second, giving back less than 0.2% of Monday’s towering 1.3% surge is barely a scratch.

Tuesday’s price action follows what I wrote in Monday’s free evening post:

Monday’s decisive bounce off of 4,700 support must be respected. At this point, last week’s step back is over, and the rally is resuming. That’s the only way to trade this. For a nimble trader, the bounce off of 4,700 was buyable. The non-stop, nearly straight-up rally through Monday’s session was paid for by tardy shorts getting squeezed out of their positions. Odds are good we will see more pressure applied to bears over the next few sessions.

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If this market was overbought and vulnerable, Tuesday’s opening losses were the perfect opportunity for bears to strike by opening the selling floodgates. Instead, most owners saw Tuesday’s early losses, shrugged, and kept holding. That caused supply to dry up and prices to bounce.

While two days of resilient trade is not conclusive (three if you count Friday’s draw), it sure is a good start. As I often write, something that refuses to go down will eventually go up. And so far, the market is refusing to resume last week’s selloff.

While last week’s selloff could return at any time, the first thing a bigger selloff needs to do is violate 4,700 support. As long as the index remains above this key level, last week’s selloff is dead.

We’ve come a long way from the October lows, and the market deserves a well-earned break. I’m not expecting a surge past 4,800 anytime soon and the market is settling in for a sideways grind under 4,800 resistance. But as long as we keep getting more up than down, this is a better place to be owning stocks than it is to be shorting them.

Everything will change if the index falls under 4,700 support. But until that happens, keep giving the market the benefit of the doubt.

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Why savvy shorts covered their positions Monday morning

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 surged 1.4% Monday, closing comfortably above 4,700 support as last week’s worries faded from memory.

Financial headlines haven’t changed, but the market is enjoying a bit of relief as Congress makes incremental progress toward avoiding a shutdown. Sometimes, that’s all it takes to cure a bout of selling. As the saying goes, buy the rumor, sell the news. And traders were definitely buying the rumor on Monday.

Time will tell if Monday’s strength proves durable, but often, it only takes removing the selling pressure for the market to regain its footing. We will learn more about the market’s mood on Tuesday, but so far, things look promising. One day doesn’t make a trend, but every trend starts with that first day.

As readers will recall, I put on a short position last week. Fortunately, I was prepared for something like Monday’s bounce. As I wrote last week:

At this point, the pullback deserves the benefit of the doubt. Anyone who shorted Tuesday or Wednesday morning is sitting on small but comfortable profits, and they can lower their stops to their entry points, greatly reducing their risk.

[S]horting a rally is one of the hardest ways to make money in the market, so this only applies to the most adventurous traders, but for the moment, this trade is working and we stick with it. The most important thing is respecting our stops. Just ask anyone who shorted “too high” at 4,400, 4,500, and 4,600. Don’t make the same mistake and pull the plug if the short trade stops working.

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With Monday’s buying erasing all of last week’s selloff, that obviously qualifies as the short trade no longer working. Savvy traders pulled the plug at their entry points. As the saying goes, no harm, no foul. This trade didn’t work, but it didn’t cost us anything. Does anyone complain about getting free lottery tickets, even when they don’t pay off? I sure don’t

As for what happens next, Monday’s decisive bounce off of 4,700 support must be respected. At this point, last week’s step back is over, and the rally is resuming. That’s the only way to trade this. For a nimble trader, the bounce off of 4,700 was buyable. The non-stop, nearly straight-up rally through Monday’s session was paid for by tardy shorts getting squeezed out of their positions. Odds are good we will see more pressure applied to bears over the next few sessions.

And if the selling returns, that’s okay, too. I’m willing to ride the next trade in either direction. Start small, get in early, keep a nearby stop, and only add to a position that’s working.

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Our short trade is working, but don’t get greedy

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 shed another 0.3% on Thursday, making this four down sessions in a row.

Financial headlines haven’t changed in a meaningful way since last week’s Santa Clause rally peaked, but no matter how good things seem, there always comes a point when we run out of new money to keep pushing prices even higher. It is starting to feel like October’s massive rebound finally reached that point of diminishing demand.

Now, don’t get me wrong, I’m not one of these cynics predicting a huge crash or anything like that. But I’ve been doing this long enough to know stocks move in waves. Every bit of up is eventually followed by a bit of down. The only question is how much down we get.

As I wrote in my Free After-Hours analysis on Wednesday:

At this point, the pullback deserves the benefit of the doubt. Anyone who shorted Tuesday or Wednesday morning is sitting on small but comfortable profits, and they can lower their stops to somewhere between Tuesday’s intraday highs and their entry points, greatly reducing their risk.

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Given Thursday’s declines, shorts should move their stops down to their entry points, making this a low-risk trade. This close under 4,700 support suggests we have more near-term weakness coming our way.

As I wrote above, I’m not at all bearish. This week’s step back is nothing more than supply and demand rebalancing from last week’s overbought levels. At this point, 4,600 support is very much in play. We might not get all the way back to this level, but my trading account is currently positioned to profit from more near-term weaknesses. This won’t be a straightforward or easy trade because it never is, but expect more down than up and keep giving this short trade the benefit of the doubt.

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How smart money is approaching this shorting opportunity

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slipped another 0.8% Wednesday, making this three down sessions in a row.

So much for the Santa Claus rally. All of last week’s profits are gone, and then some. As I warned readers in December, anyone who didn’t lock in profits risked giving it all back by holding too long. And that’s exactly what happened:

[S]mart traders are sitting on a big pile of profits they collected last week and are getting ready for the next big trade. Maybe that’s shorting the reversion trade later this week. Maybe that’s sitting in cash until something more interesting happens in January. Either way, anyone expecting these big gains to keep rolling in clearly doesn’t understand how markets work.

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Now that the index is teetering on 4,700 support, the crowd is wondering what comes next. The answer is easy: either stocks bounce…or they don’t.

The index broke the very steep and very straight-up rally from the October lows. Since the market loves symmetry, a rally that goes too far tends to be followed by a pullback that goes too far, too.

Unfortunately, as easy as that sounds, trading successfully is anything but easy. Expect lots of misleading bounces along the way (a sawtooth decline), which could start as early as Thursday. Remember, if this were easy, everyone would be rich.

At this point, the pullback deserves the benefit of the doubt. Anyone who shorted Tuesday or Wednesday morning is sitting on small but comfortable profits, and they can lower their stops to somewhere between Tuesday’s intraday highs and their entry points, greatly reducing their risk.

As I warned readers on Tuesday, shorting a rally is one of the hardest ways to make money in the market, so this only applies to the most adventurous traders, but for the moment, this trade is working and we stick with it. The most important thing is respecting our stops. Just ask anyone who shorted “too high” at 4,400, 4,500, and 4,600. Don’t make the same mistake and pull the plug if the short trade stops working.

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What to do now that Santa left town

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slipped 0.6% on Tuesday after the good feelings surrounding last week’s Santa Clause rally left town.

Headlines haven’t changed in a meaningful way, but the calendar rolled over, and we find ourselves in a new year and a new quarter. All of the repositioning that took place in the final weeks of 2023 is done, and professional investors are starting with a clean slate. Gone is the pressure to chase prices into year-end, and now these institutional money managers are free to trade the positions they believe in, not what they think investors want to see on their year-end statements. And so far, it seems like big money doesn’t want to chase anymore.

One day doesn’t make a trend, but these are the early hints that changes could be blowing our way.

I was on vacation last week, and as a personal rule, I didn’t trade, but now that I’m back in the office, it’s game on. I’m not ready to jump on the short bandwagon after a few hours of weakness, but if this sticks around, I’m happy to start with a small short and a nearby stop.

As I’ve written before, shorting an uptrend is one of the hardest ways to make money trading because it requires impeccable timing. But if we approach it with a good risk management strategy, we can take a shot relatively safely.

The index bounced off of the afternoon lows in the final minutes of the session, so I didn’t pull the trigger on a short position yet, but I will be watching and ready to short continued weakness on Wednesday.

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The more things change, the more they stay the same

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Markets take the stairs up and the elevator down. That phenomenon was in full effect Wednesday when one afternoon of losses wiped out a week’s worth of gains.

Luckily, my regular readers saw this coming. As I wrote in my free analysis two days ago: 

The bulls won again on Monday, but that doesn’t mean smart money was chasing these overbought levels. In fact, smart traders are sitting on a big pile of profits they collected last week and are getting ready for the next big trade. Maybe that’s shorting the reversion trade later this week. Maybe that’s sitting in cash until something more interesting happens in January. Either way, anyone expecting these big gains to keep rolling in clearly doesn’t understand how markets work.

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These things are so predictable, yet every time we find ourselves in the middle of these situations, the average trader cannot help but think, “This time is different.” Well, as Wednesday afternoon proved, the more things change, the more they stay the same.

While I was one of the first in line to buy the November rebound when that kicked off last month, I will fully admit I didn’t anticipate the huge size of this rebound. I was willing to stick through last week’s 4,600 breakout, but late last week was getting a little too rich for my blood, and I couldn’t help but start collecting some very worthwhile 3x ETF profits.

I was fully aware I was collecting profits too early, but since no one can consistently pick tops, that means we are left choosing between selling too early and holding too long.

Wednesday afternoon’s price action shows why I prefer being in cash when the next trade lands. While everyone else was filled with dread watching their profits vanish, I was primed and ready to jump aboard short bandwagon and profit from slow money’s pain.

I fully admit I sold the rally too early, but on days like this, I don’t mind.

As for what happens next, these are rarely one-day events, and it could get bumpy before it gets better. If you are not using trailing stops to protect your profits, this is a good time to start.

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Why smart money was watching Monday’s rally from the sidelines

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 added a half percent Monday, on the first day of what will be a slow, holiday-affected week.

This will probably be the third slowest week of the year, following only Thanksgiving and next week between Christmas and New Year’s. For that reason, I don’t expect a lot of meaningful buying this week. Big money traders who wanted to buy ahead of year-end already bought. These managers have one foot out of the door and are not doing any serious work this week.

As I wrote during Thanksgiving, these holiday-affected sessions are vulnerable to elevated volatility as the retail traders and computers start doing wonky things without big money’s guiding hand.

At this point, I’m content watching this rally from the outside. Seven out of the last eight sessions ending in the green is a lot. The unfortunate thing for anyone buying these highs is the market has a habit of reverting to the mean. A stretch of down days to get us back to more normal levels wouldn’t surprise me at all.

Stocks move in waves, and bits of up are always followed by bits of down. Monday wasn’t that day. But it will be here soon enough, even if the selling does nothing but consign us to a sideways grind into January.

The bulls won again on Monday, but that doesn’t mean smart money was chasing these overbought levels. In fact, smart traders are sitting on a big pile of profits they collected last week and are getting ready for the next big trade. Maybe that’s shorting the reversion trade later this week. Maybe that’s sitting in cash until something more interesting happens in January. Either way, anyone expecting these big gains to keep rolling in clearly doesn’t understand how markets work.

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A warning for both bulls and bears

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Thursday was a choppy session for the S&P 500 as the index bounced between gains and losses before finishing in the middle of the day’s range, up a modest 0.3%.

Wednesday’s 1.4% pop was one of the biggest up days since the November rebound kicked off. But buyers were a lot more cautious Thursday as fear of heights kicked in.

I’m not ready to call this a top, but anyone buying at these levels is going to need a TON of things to go right for them to make good money on their trade.

Everyone knows stocks move in waves, and we have gotten a tremendous amount of up since the November lows. It is only a matter of time before we get the next inevitable down wave. But like I said, I’m not calling this a top. The only thing more foolish than buying here is shorting for no other reason than stocks are too high. Momentum is a powerful force; just ask anyone foolish enough to short 4,400, 4,500, or 4,600.

This will top and turn into a great short at some point, but it needs to top and start going down before we short it.

I locked in some fantastic 3x ETF profits Wednesday afternoon and Thursday morning. Now it is time to get ready for the next trade. I’m most excited about shorting a near-term pullback. But I’m just as happy to buy the next big short squeeze up to 4,800 if that’s what the market wants to do.

Smart traders wait for the market to reveal its hand before committing their money. That’s why I’m waiting patiently from the sidelines, sitting on a big pile of profits from my last trade.

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Everything is great…and that makes me nervous

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 surged 1.4% Wednesday after the Fed told investors inflation came down faster than expected, and they penciled in three rate cuts for next year. That wave of buying led to the biggest one-day gains since mid-November.

Bulls are cocky, bears are defeated, and I’m nervous. As I wrote readers on Tuesday, even though I long this market and making good money with 3x leverage, I was already moving toward the exits:

While the market looks good, this is the tipping point where we shift our mindset from offense to defense. I’m not expecting a lot of upside, meaning I plan on collecting profits relatively quickly. I’m not selling right now, but I already have my eyes on the exit.

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The market has done nothing but go straight up since early November. And Wednesday’s gains were some of the biggest of the entire move. That looks a lot more like a climax than the start of the next big rally.

I’m not one to call tops, but this feels very toppy. I’m not saying momentum can’t keep pushing us higher over the next few days and weeks, but this late in the move, nearly everyone who wanted to buy has already bought. That means there are far fewer buyers left to keep pushing prices higher.

I bought the 4,600 breakout last week using 3x leverage, and it’s been a great ride. But I recognize good enough when I see it, and these gains were great. That’s good enough for me, and I have started collecting partial profits Wednesday afternoon.

Without a doubt, I’m probably pulling the ripcord prematurely, but since I don’t pick tops, that means I’m left choosing between selling too early and holding too long. Since I’m in this to make money, I always pick selling too early because that leaves me in the best position possible to be ready for the next trading opportunity.

Maybe that means I buy back in later this week, next week, or next month when prices keep racing higher. Or maybe I short the inevitable step-back when it finally gets here. But no matter what happens next, I will be ready for it.

We only make money when we close our best trades, and there is no way I’m letting this big pile of 3x profits escape.

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Why I’m already standing near the exit

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 started Tuesday’s session in the red after the monthly inflation reading came in somewhat elevated at 3.1%. But it didn’t take long for buyers to show up and push the index into the green. By the close, the S&P 500 added another 0.5%, and the slow-motion breakout above 4,600 resistance continues.

Weak opens and strong closes are typical of bull markets. We consumed a whole lot of upside getting to these levels, meaning slower times are ahead. It is hard to get excited about these small gains, but as long as we keep getting more up than down, there is only one way to trade this.

The Santa Clause rally arrived early this year, and stocks are slowly drifting higher this week. No one is getting rich from these few tenth-of-a-percent rallies, but when you add them up, they turn into real money. I’m not expecting a big short squeeze from this 4,600 breakout, but there are enough shorts getting squeezed to give us this near-term lift. As slow and boring as this feels, the slower it goes, the more sustainable it is.

While the market looks good, this is the tipping point where we shift our mindset from offense to defense. I’m not expecting a lot of upside, meaning I plan on collecting profits relatively quickly. I’m not selling right now, but I already have my eyes on the exit.

My stops have already been lifted to my entry points, turning this into a low-risk trade. I’m not ready to pull the rip cord just yet, but that day is coming. If we continue with a string of up days, I will start collecting some partial profits in the back half of the week.

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Why the bulls keep winning

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Monday’s session 0.4% higher, putting even more distance between the index and prior resistance at 4,600.

Lucky for readers, Monday’s gains were expected. As I wrote in last Friday’s post titled, “Bears Have Been Warned”:

The index is not going anywhere fast, but more up than down means there is only one way to trade this. Lift stops above recent lows, and see where this takes us.

We finally broke resistance, and these things usually go a bit before stopping. Keep expectations in check, but stick with what is working.

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The economy continues down the “just right” path. Not hot enough to keep inflation elevated and not weak enough to threaten employment and push us into a recession.

How much longer this “just right” lasts is anyone’s guess, but savvy traders focus on what the market is doing, not what could happen. At this point, 4,600 resistance is no longer a barrier. In fact, resistance often turns into support, so Monday’s confirmation further boosts the bull’s case.

The explosiveness in this move was used up weeks ago, meaning we are left with this slow grind higher. There is nothing wrong with that. We are stuck with what the market gives us. If we want to make money, this is how we do it. And making money sure beats what the bears are doing right now…

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Bears have been warned

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 closed above 4,600 resistance on Friday for the first time in over a year and a half.

Bears fighting “too high, too fast” keep giving away money, but this doesn’t surprise readers. As I wrote on Thursday:

Something that refuses to go down will eventually go up. At this point, bears are losing the argument, and it will likely get worse for them if they continue fighting this market. If the November rebound was going to fail, it would have happened by now.

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The index is not going anywhere fast, but more up than down means there is only one way to trade this. Lift stops above recent lows, and see where this takes us.

We finally broke resistance, and these things usually go a bit before stopping. Keep expectations in check, but stick with what is working.

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Why bears are losing the argument

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 added 0.8% Thursday after Wednesday’s bearish intraday reversal turned into a lot of nothing.

One day’s down becomes the next day’s up, and so far, the market doesn’t seem interested in doing anything meaningful. November gave us a huge rebound; now it is time to rest.

That said, holding all of the recent gains confirms these levels are real and the index is not teetering on the edge of a collapse. If stocks were fragile and overbought, one of these waves of selling would have kept going. Instead, most owners shrugged and kept holding.

Stocks don’t have the strength to keep charging higher, but the longer we hold these levels, the more real they become. Something that refuses to go down will eventually go up. At this point, bears are losing the argument, and it will likely get worse for them if they continue fighting this market. If the November rebound was going to fail, it would have happened by now.

Bigger trading opportunities are coming our way, but it will take time. Stay patient and resist the temptation to overreact to this intraday chop.

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Why smart money is sitting on their hands

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 finished Tuesday’s session essentially flat as Monday’s wave of selling turned into a lot of nothing.

As I wrote Monday evening, the market is consolidating November’s gains under 4,600 resistance. This makes recent price action meaningless at best, and outright deceptive at worst:

Far and away, the hardest thing to do in the market is to not trade. We have opinions, and the market is always doing something, but at this stage, every trading signal fizzles and reverses hours later. Just ask all of the bulls that bought Friday’s strength, only to watch those profits turn into losses Monday morning.

This is a consolidating market, meaning we can’t read anything into these intraday gyrations. Something will happen, but this isn’t it. Keep waiting and watching.

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This market is an equal opportunity humiliator, zinging both the bulls and the bears. Optimists who bought Friday’s pop are sitting on losses, and now we can add cynics who aggressively sold Tuesday’s poor open. More interesting trading opportunities are coming, but these are not them.

At this point, it is a tossup between stalling under 4,600 resistance or resting before the next leg is higher. This remains a sentiment trade, meaning anything is possible. The best we can do is wait for the market to reveal its intentions. Until then, smart money is sitting on their hands.

I’d love to be making money right now, but it’s been a fantastic year of trading, and there is no reason to force a bad trade here for nothing more than the impulsive need to be trading. Better opportunities are coming. We just have to be patient.

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Why Monday’s selling doesn’t mean anything: Part II

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slipped 0.5% Monday as the index continued consolidating November’s big rebound under 4,600 resistance.

The market has been stalled for a couple of weeks, but this was expected. As I wrote early last week:

Calm markets are bullish, and the path of least resistance remains higher, but I’m not excited to hold all of the risk underneath us for another few points of upside. That means I will keep watching this develop from the sidelines after collecting big profits before the Thanksgiving break. But if this strength persists and we are setting up for another pop through in overhead resistance, I will be happy to jump back in. But we’re not there yet.

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Well, here we are a week later, and not much has changed.

Far and away, the hardest thing to do in the market is to not trade. We have opinions, and the market is always doing something, but at this stage, every trading signal fizzles and reverses hours later. Just ask all of the bulls that bought Friday’s strength, only to watch those profits turn into losses Monday morning.

This is a consolidating market, meaning we can’t read anything into these intraday gyrations. Something will happen, but this isn’t it. Keep waiting and watching.

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Why Monday’s price action doesn’t mean anything

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slipped 0.2% on this first Monday back from the Thanksgiving-affected week.

Not much is going on in the financial press, and a little give-back following last week’s modest 1% gains is not a surprise. Big money was not involved last week, and institutional investors often undo what the little guys did when they were on vacation.

The first few sessions after a major holiday are usually slow, and I’m not expecting anything interesting before the second half of the week…at the earliest.

That said, it is constructive to see the index hold the majority of recent gains. If this market skating were on thin ice, Monday’s selling would have accelerated, not stalled after a fairly inconsequential loss.

At this point, most owners are comfortable holding for higher prices, and the resulting tight supply is keeping a floor under the market. The longer we go without retreating, the more real these prices become. (But as always, we can’t take anything for granted, and the next wave of fearful selling is never more than one bad headline away.)

The market is behaving well near 4,600 resistance, and acting like it wants to test this level before doing anything else.

Calm markets are bullish, and the path of least resistance remains higher, but I’m not excited to hold all of the risk underneath us for another 20-40 points of upside. That means I will keep watching this develop from the sidelines after collecting big profits before the Thanksgiving break. But if this strength persists and we are setting up for another pop through in overhead resistance, I will be happy to jump back in. But we’re not there yet.

Smashing through 4,600 resistance or getting rejected by this level, it doesn’t matter what the market does next as long as it does something. We will learn a lot about the market’s mood in the second half of this week.

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