The spring sprung

By Jani Ziedins | Intraday Analysis

Sep 06

S&P500 daily @ 3:00 EDT

MARKET SENTIMENT

The spring sprung to the upside today in a powerful rally today.  This continues the trend of the biggest market days moving to the upside.  This indicates how much artificial bearish pressure is on top of the market trying to hold it down.  The thing a lot of people forget is the market is always stronger than bears, bulls, and even fundamentals.  The market wants to go higher and there is nothing we can do to stop it.  If you can’t beat ’em, join ’em.

No doubt the explosive move is driven largely by shorts getting their faces ripped off.  There are people far smarter than I that have figured out exactly what the market should do, but in my case ignorance is bliss.  I don’t trade fundamentals or technicals, I trade supply and demand because that is the undisputable law of nature governing the markets.  Simple truth is the market is far larger than any of us and it doesn’t care what we think.

Now the question remains if this rally will fizzle like the previous high back on Sept 21.  But nothing is indicating this rally is on the verge of petering out.  We put in rock solid support at 1400 and there is a huge contingent of investors watching this move from the sidelines as they are under-invested.  Over time they will slowly convert from afraid of a correction to afraid of missing the rally.  Fear drives the market and this time fear is going to drive it higher.

MARKET BEHAVIOR

As mentioned earlier, today continues the trend of the biggest moves occurring to the upside. Bears have been getting blown out of the water all summer and this pattern continues.  The time to short the market was back in May when everyone was bullish.  But like normal, most traders are stuck looking back at what would have worked and not looking forward to what will work.  Profits are located beyond the right edge of the chart, not to the left.

The trend of higher highs and lower lows remains in tact.  The trend is our friend this time.  Remember, a trend is far more likely to continue than reverse because trends continue countless times, but only reverse once.  Stick with what is working.

TRADING OPPORTUNITIES

We have employment tomorrow and a couple European and Fed headlines next week, but clearly the market wants to go higher and has ignored any and all the reasons it should go lower.  Trade the market, not opinion.  It wants to go higher and that is what side we need to be on. Stay long until the market tells us it wants to do something different.

The volatile swing trades are behind us and we should focus more on position trades and holding for larger gains.  There is a real possibility this trend could continue to the election.  How it responds then will be up for reevaluation at that point based on how other market participants are positioned.

Regardless of what anyone says, the market is agnostic politically, so who wins doesn’t really matter.  The market would probably prefer a friend in Romney, but the major downside to a Romney win is his promise to “Repeal and Replace” Obamacare and financial regulations.  The market hates uncertainty and reopening those debates would weigh heavily on the markets.

AAPL daily @ 3:01 EDT

INDIVIDUAL STOCKS

On a day like today, most everything is up, but some more than others.  The out-performance/under-performance could signal a stock’s strength going forward.  But don’t over analyze these things because some of the stocks could have already made their big move prior to the market.  For example AAPL’s move today is fairy modest, but I wouldn’t throw the stock out yet.  It’s been outperforming the market recently so a slow day ahead of a major product release is not that big of a deal.

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.