PM: New high, but finish flat

By Jani Ziedins | Intraday Analysis

Dec 12

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR

Stocks notched the highest levels in almost 2 months after the Fed announced it would keep rates near zero until unemployment dropped to 6.5%.  But the enthusiasm was short-lived as the markets gave back all those gains and closed flat for the day.  Volume was higher between short-covering and momentum trading, but those buyers quickly ran out of money and the market couldn’t entice anyone else to jump in at the new highs.

MARKET SENTIMENT

We got another shot-squeeze today, the 7th by my count since the November lows.  I’m surprised bears are still solvent after all that bloodletting.  Chances are many bears have grown tired of shorting the market and conceding defeat.  It is okay to be wrong, it is fatal to stay wrong.  But the ironic thing is as soon as most give up, we will finally get that selloff.  The market is cruel that way.

TRADING OPPORTUNITIES

Stocks are getting a little rich up here and it would be a good time to trim profits.  The market is not setup for a major fall, just a retest of the 50dma or 1400.  The two reasons we won’t have a major correction, 1) the market is pessimistic, not complacent and 2) the market is obsessing about negative news, not oblivious to it.  The fuel for major selloffs is unexpected bad news.  Anything that has been talked about ad nauseam is not going to surprise anyone.

For a trading plan, lighten up on longs and wait for better prices to buy back in.  The extremely aggressive could look to put on a quick short, but don’t stay short more than a couple of days and close your position near the 50dma.  But honestly there isn’t a lot of profit to make a short trade worth the risk.

INDIVIDUAL STOCK

AAPL seems to be firming up around the $540 level.  This isn’t an absolute floor for the stock, but some sideways consolidation here is part of the basing process.  We will probably see one more dip lower due to broad market weakness that flushes out the last of the hopeful, but after that the stock will be better poised to climb out of this hole.

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.