A little giveback

By Jani Ziedins | Intraday Analysis

Oct 22
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

Stocks snapped a powerful, three-day win streak, giving back nearly 25-points from the intraday high. Under normal circumstances this would qualify as a wild ride, but given recent volatility, this was a fairly benign pullback. And we shouldn’t be surprised to see the market run into some headwind as traders lock-in a 130-point bounce off recent lows.

1,950 has been a meaningful technical level going all the way back to June, and it was again today. We rallied up to this level early in the day, but couldn’t break through and that is when the liquidation began. There was no real headline driving either buying or the selling, meaning most traders are still reacting to last week’s emotional rollercoaster.

Right now we find ourselves stuck between the 200dma and the 50dma and will likely remain here for a bit longer. Today’s weakness will rekindle anxiety in those that regretfully held through the dip to 1,820, compelling them to sell proactively before they risk going through that pain again. That doubt and fear could easily push us back to the 200dma, but the real test comes next. Does the market panic and plunge through the 200dma on its way to undercutting the 1,820 lows. Or will calmer and more confident value investors shrug off the volatility and take advantage of emotional selling to buy their favorite companies at a discount?

While the bounce remains fragile, a dip to the 200dma and 1,900 is a normal and healthy part of building a sustainable rebound. The time to worry is if we fail to hold support so soon after reclaiming it.



About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, 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 children.