Choppy trade continues

By Jani Ziedins | End of Day Analysis

Mar 26
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update

MARKET BEHAVIOR
Stocks retreated from early gains and finished just above 1,850 support as they continue bouncing around between 1,850 and 1,880.  Volatility is increasing as intraday ranges span more than one percent, but the market is not moving higher or lower as each gain or loss is quickly unwound the next day.

MARKET SENTIMENT
Owners don’t want to sell and those with cash don’t want to buy.  This standoff leaves us trading sideways as both demand and supply remain balanced.  Volume has been light, probably due to big money managers taking their kids skiing for spring break.  The big questions is what will happen when they come back to work.  Will they start locking in profits or bidding up the price of stocks?

Complacency is the rule as geopolitical conflict between Western Europe and the world’s largest oil producer largely goes unnoticed.  The best profit opportunities arise when the market overreacts to some fear mongering and owners give away their stock at steep discounts.  Those reduced prices compensate dip buyers for taking the risk, but near record highs there is little reason to own the risk since no one is willing to pay us for it.  While momentum is still higher, making money in the markets comes from balancing risk and reward.

TRADING OPPORTUNITIES
Expected Outcome: At the upper end of a trading range
Stocks have either stalled above 1,850 and are on the verge of reversing, or they are resting before making their next move higher.  And to be honest, I could easily see either outcome happening.  Sometimes we don’t have an edge on the market and it is best to wait for the next trade with better odds.  Everyone can make money in the markets, the hard part is keeping it.  The number one way people give back profits is forcing trades when there isn’t one.

Plan you 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.

handro March 26, 2014

Yes, *except* the profound sell-off in high-beta stocks tips the balance towards further declines. There is large volume selling going on, its just in the high-beta stocks, and not as much in the S&P or the Dow, giving a veneer of a stalemate, meanwhile all the momentum stock are bleeding heavily. 10% drop in a couple of days is nothing to sneeze it…

I get nervous when the large-cap indexes don’t move much but underneath there is broad selling pressure…

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