Holders are holding

By Jani Ziedins | Intraday Analysis

Nov 22

S&P500 daily at end of day

MARKET BEHAVIOR

Markets added a little on this pre-Thanks Giving session.  As expected, volume was far under average.  But seeing the market close above the 200dma is encouraging as it demonstrates holders are not eager to flip their shares.

Friday’s shortened session will have even less trade and most likely make for another boring session.  But after the last couple months, boring is good.  Don’t expect any real buying or selling until next week.  There is always political risk in the Middle East, but outside of that not much should happen until big money managers return to the office.

MARKET SENTIMENT

It is constructive to see people continue holding stocks after the large bounce back to the 200dma.  That means most holders are waiting for higher prices and their continued holding will keep supply tight and support prices at these levels.  This current stability is demonstrating everyone who thought the world was coming to an end already sold and the current crop of holders has a longer-term view.  This shift in ownership is what put a floor under the market.

TRADING OPPORTUNITIES

If there is one thing the market doesn’t do well, it is finding the perfect balance point.  Instead it tends to overshoot on both the high and low side.  We sold off more than we should have and no doubt we’ll also bounce higher than we ought to.  Expect prices to continue higher next week, but don’t get greedy and be prepared to lock in profits because while the news might be random, the market’s reaction to it isn’t.  The market will get a little frothy, we’ll run out of buyers, and the inevitable negative headline out of DC, Europe, or the Middle East will send of lower.  And if we’re being honest here, it isn’t the headline that sends us lower because there are negative headlines every single day.  It is running out of buyers that knock the markets lower.   But people don’t realize this because the financial press gets paid for coming up with reasons and they always find something to blame it on.

After we peak and come back down, we might make a new low, or we might bounce prior to 1350.  But the great thing is it really doesn’t matter to the trader who is in cash and patiently waiting for the next trade.  The market will bounce when it bounces and the opportunistic trader will be there to make money.

The game plan is higher, lower, and then higher again.  Sounds easy enough, but the money is made in the details, in this instance, getting the timing right.  And that is why we watch to see what everyone else is doing so we can put the odds in our favor.

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.