AM: 100,000 views!

By Jani Ziedins | Intraday Analysis

Apr 23
S&P500 daily at 1:28 EDT

S&P500 daily at 1:28 EDT

AM Update
CrackedMarket crossed 100,000 views this morning and the enthusiastic response from readers far exceeded my wildest expectations.  Everything I know about the markets I owe to other traders’ generosity and willingness to share their insights and experiences.  I’m grateful and flattered I have the opportunity to give back to the community in my own small way.  Thanks!

MARKET BEHAVIOR
The range bound market continues the recent bounce and is challenging 1580 by midday.  (addendum: we just had a wild mini-flash crash as the market plunged nearly a percent and then right back up over a matter of minutes.  It seems AP’s twitter account was hacked and the hacker tweeted the White House was attacked and Obama was hurt.  All untrue.)

MARKET SENTIMENT
Either this is the last gasp of a dying market, or there are far more buyers at these levels than even the bulls expected.  Paradoxically everyone’s expectation of a brief pullback after such a long run is what keeps the rally alive.  Prospective buyers eager to get in this market buy any weakness and this type of dip-buying is sustainable because these are investors with longer time horizons.  The dip buying we are wary of is late followers jumping on an over-crowded bandwagon.

Sustainable buying is sustainable and unsustainable buying is unsustainable.  As silly and obvious as that sounds, it is extremely insightful.  The longer we hold these levels, the more likely the rally will continue.  Unsustainable buying dries up quickly and the market crumbles on the lack of demand.  Holding 1550 for a month and a half demonstrates ample supply of investors willing to buy at these levels and  easily overcomes all the pessimism and profit taking thrown at it.

TRADING OPPORTUNITIES
Expected Outcome:
Unsustainable bounces only last a few days before collapsing under their own weight.  Holding these levels through Wednesday is more than a few days and demonstrates ample demand and willingness of investors to buy these levels.  I’m still wary of this market and a breakdown over the next twenty-four hours is most likely the end of this run.

No one can predict the future and we must trade the market we are given.  There are plenty of reasons for this market to top here, but there are just as many for it to continue.  I’ve been bearish on this market for a month and the market keeps holding up.  I have to respect that.  It is okay to be wrong, it is fatal to stay wrong.

Retesting 1540 over the next few days is likely the end of this rally, but holding strong through Wednesday means new highs are likely.  But none of this changes the fact the spring is coiled to the downside and holders need to be disciplined in their use of stops to get them out ahead of trouble.

Alternate Outcome:
Markets refresh one of two ways, the most common and efficient is through a sharp pullback.  This shakes out weak holders and clears the way a move higher.  But the second way is a long sideways grind that bores traders out of their positions.  They achieve the same result, but in different ways and over different time frames.  The longer the sideways trade, the greater the upside potential.

INDIVIDUAL STOCKS
We are just a few hours away from AAPL’s earnings.  Will this finally be the fundamental catalyst that turns the stock around?  Will we get the buybacks and dividend increases everyone is hoping for?  Or will we finally see disappointing iPhone5 numbers that justify the selloff from September’s highs?  The market is better at predicting the news than the news is at predicting the market.   We will soon find out if the market was ahead of the news on this one.

NFLX daily at 1:28 EDT

NFLX daily at 1:28 EDT

One last selloff will make an interesting buying opportunity, but remember this is now a trading stock, not a long-term hold.  AAPL no longer has a monopoly on the personal device market, exploding sales, and eye-popping margins.  AAPL is competing in a completely different market than two years ago and no matter what anyone else says, AAPL’s entire fortune is tied to iPhone sales.  Without hardware sales, there is no iTines, App Store, or any other residual income.  These additional services are not diversification, but further reliance on hardware sales.

NFLX exploded this morning and continues humiliating bears.  These things go further and longer than anyone expects.  We trade stocks, not valuations so don’t get in the way of this freight train.

Plan your trade; trade your plan

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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.

Jonathan April 24, 2013

Congrats Jani!

100K is very well deserved for your quality of writing and analysis. Next milestone, 1M (which means I hope you continue CrackedMarket for many, many more years to come)!

    Jani Ziedins April 24, 2013

    Thanks for your support and encouragement.

Marc April 24, 2013

Let me add my congratulations also for an exceptionally well written body of work. I don’t know where or when you came up with the moniker “Cracked Market” but it seems more apt than ever….someone said the other day that its like playing monopoly with a 3 year old who owns the bank 😉
Methinx your emphasis on studying the psychology of the market is even more relevant than fundamental or technical readings.
I, probably prematurely (supply is not overcoming demand at this moment), have initiated a small short position in ES. If we hit new highs then I’ll lick my wounds and return humbled again. Its just about money management now and limiting risk.

    Jani Ziedins April 24, 2013

    Nothing wrong taking a stab at the market with a small position and disciplined stops. While we’re in this to make money, it is also fun to challenge the marke in a responsible way.

    CrackedMarket originally came from the term market cracks when referring to flaws in the efficient market hypothesis, but it also works well as a synonym for crazy in times like these.

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