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By Jani Ziedins | End of Day Analysis
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The S&P 500 added 1.5% Friday as it powered to ten-month highs.
May’s employment report showed the most robust hiring in four months as employers continue shrugging off persistent inflation and high interest rates.
This was one of those half-full/half-empty moments for the stock market and it was all half-full on Friday as investors embraced the economic resilience and shrugged off the prospect of future rate hikes.
Will the stock market’s indifference to inflation and interest rates last? Probably not. That’s why smart money is already locking in some profits at these multi-month highs.
Ignore both the bulls and bears. Anyone positioning for a big directional move in either direction is simply not paying attention. This is a choppy, sideways market with a slight upward bias. Money is made trading against these swings, not betting on their contuation. Until further notice, dips are buyable and rips are sellable. And just as important, take profits early and often because anyone holding a few days too long will watch their winners turn into losers.
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Bears were right for a few hours this week during our brief “sell the news” moment, but anyone that didn’t collect those profits were left holding a pile of losses a day later.
And the same will apply to bulls pressing their bets at multi-month highs. We take profits when we have them because if we don’t, the market will steal them back a day or two later.
I still like this market and the slow grind higher will continue, but anyone pressing their luck near 4,300 hasn’t been paying attention. Lock in some very worthwhile profits (7.5% in a 3x ETF over the last two sessions) and then get ready for the next trade.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 slipped 0.6% as Congress moves toward resolving the debt ceiling crisis.
This negotiated compromise finally lifts the clouds that have been hanging over stocks for weeks. But as I wrote last week, anyone waiting to buy stocks after a debt deal was reached would find themselves a day late and a dollar short. And I further warned readers on Monday:
Of course, now that we are 100 points higher, the risk/reward flipped against us. The easy profits are behind us and we are more vulnerable at the upper end of the recent range. This is the time to be taking profits, not chasing an imaginary breakout.
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Successful traders make money buying risk and selling safety. Last week was the time to buy the debt ceiling worry, and this week was the time to sell the debt ceiling relief. “Buy the rumor, sell the news” is as old as the stock market itself.
As for what comes next, ignore both the bulls and bears. We are not powering higher in a massive short squeeze the same way we are not tumbling back to the 2022 lows on a crumbling economy.
Anyone positioning for a big directional move in either direction is simply not paying attention. This is a choppy, sideways market with a slight upward bias. And now that we are falling into the slower summer months, this will only reinforce the market’s listlessness.
If every dip is going to bounce and every bounce is going to dip, money is made trading against these swings, not betting on their contuation. Until further notice, dips are buyable and rips are sellable.
And just as important, take profits early and often because anyone holding a few days too long will watch their winners turn into losers.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Our politicians finally did their jobs and reached an agreement to lift the debt ceiling. No one is happy about the proposed deal, but that’s why it’s called compromise.
And since the looming debt ceiling was the biggest worry hanging over the market, stocks finished Tuesday’s session…flat. Funny how that works.
But that doesn’t surprise readers of this blog. This lethargic reaction to good news happens so often it has become a market cliche: ” Buy the rumor, sell the news.”
Anyone waiting to buy the news of a debt deal is waaaay late to the party because all of the profits were collected last week when the outcome was far from certain. This is why I was telling readers to buy last week’s dip on Wednesday:
As for what comes next, expect the choppy, sideways trade to continue. We’re not going anywhere, but that won’t stop impulsive traders from jumping from one side of the boat to the other.
Until further notice, we keep trading against these swings. That means this week’s swoon is a buying opportunity.
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Of course, now that we are 100 points higher, the risk/reward flipped against us. The easy profits are behind us and we are more vulnerable at the upper end of the recent range.
This is the time to be taking profits, not chasing an imaginary breakout. Feel free to leave some money in the market, but make sure we lift our trailing stops to protect last week’s profits. And as always, taking some worthwhile profits proactively is never a mistake. Remember, we only make money when we sell our winners.
As for what comes next, this week’s break above 4,200 could trigger a short squeeze up to 4,300. That’s not the most likely outcome, but it is certainly a possibility. If prices rally on Wednesday, buy back what we sold on Tuesday and ride that wave higher. But most likely, not much will happen, and that means we waiting to buy the next dip under 4,200.
It makes no difference to me what happens next, only that my trading plan will be ready when the next profit opportunity comes along.
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If you find these posts useful, help me out by liking and sharing them!
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What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
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