Sell the news?

By Jani Ziedins | Intraday Analysis

Jun 11

S&P500 daily @ 2:09 EDT

Markets opened higher on Spain’s bailout, but gave up all those gains out of the gate.  We are trading just a tad in the red after finding support at the 1320 level.  Was this fade the final gasps of last week’s bounce?  Or do we still have some upside left before turning lower?  Potential upside is about 30 S&P points and downside is about 50 points.  Surely it is not a good risk/reward for initiating a new position and a reasonable time for swing traders to think about reeling in profits.

It is helpful to see the EU lend Spain a lifeline, but it is just a temporary patch to keep them afloat.  And no doubt that is why pros used the Spain pop to sell more shares.  Last week a lot of shorts got squeezed as we witnessed the best weekly gain in months.  Today’s price peaked at resistance from May 29th’s reversal, but for me, that was a little too clean and predictable.  With all the buy orders above 1330 between breakout buyers and shorts getting squeezed, it seems we are bound to push through that region, if for no other reason than to trigger a flurry of transactions so market makers can pay their kids private school tuition.  But that doesn’t mean we can’t trade back down to the 200dma first to shake out all the swing traders and premature bulls.  Remember, it is always about hurting the greatest number of people at any given time.    Where we go from here depends on who is more at risk, the bears of bulls. Last week flushed out a lot of bears, meaning it could be the bulls turn next.

But all of this is splitting hairs.  The overriding theme is we are range bound and will most likely stay that way for another month or two.  No reason for bulls to go long or bears to go short, as any directional traders will get chopped up when each breakout or breakdown quickly reverses.  The best trade continues being the swing trade; buy the dips, sell the rallies.  Any CAN SLIM trader should relax and take some time off.  Keep a casual eye on the markets for a turning point, but no need to obsess daily over a range bound market.

Stay safe

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and writer who has successfully traded stocks and options for more than a decade. He earned a B.S. in Mechanical Engineering from the Colorado School of Mines and an MBA and M.S. Marketing from the University of Colorado Denver. His prior professional experience includes manufacturing engineering at Fortune 500 companies, structural engineering, small business consultant, collegiate instructor, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two young children.