Biggest Bullish Catalyst

By Jani Ziedins | End of Day Analysis

Jun 03
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

It was another meaningless day for the market as it remains stuck in neutral. The S&P500 finished inside a 20-point range for the seventh consecutive day. While some claim this is boring, listless trade. Reality is a lot of passion is hiding under the surface. Given the headlines out of Europe, Asia, Fed, and our economy, plus stocks at record levels, there are few traders yawning from boredom. Most are passionately arguing their opinion that this market is either overvalued and on the verge of crashing, or in the early stages of another 90’s style bull run. The market isn’t idling in neutral because nothing interesting is going on, it is stuck because bulls and bear are pulling so hard from both ends.

If we listed of all the reasons this market should selloff, it would take several sheets of paper. But I suspect most would struggle coming up with more than a handful of fundamental drivers for us to continue rallying. Yet here we are at record highs. For many investors, this obvious skew is all the reason they needed to dump their stocks ahead of the imminent correction. But as the contrarian, I’m left wondering why this market is so strong when the news is so obviously bad. The thing most people forget is markets don’t trade news, fundamentals, or technicals, they trade opinions. No matter how bad the news, if we run out of sellers, prices rally. Opposite is true when we run out of buyers. Trade people, not news.

A lot of the reasons we keep stalling above 2,120 is because those with cash are afraid of Greece dropping the Euro. We’ve been conditioned by years of articles about what a disaster that would be. But here’s the thing, markets are only vulnerable to the unknown. Since every wannabe investor hanging out in Starbucks is talking about what’s going on in Greece, we can safely ignore it. That doesn’t mean these events won’t drive near-term volatility, but that we can take comfort in knowing it won’t cause the next market meltdown because there are so few left to sell the “surprise” headline.

I’ve been constructive on this market for a while, but stalling near the highs for over a month is a concern. Those with cash are not in a mood to buy because they are afraid of Greece, rate hikes, and a sluggish economy. But clouds of uncertainty always dissipate and the best time to buy is when everyone is most uneasy. The biggest bullish catalyst in front of us, and yes I said bullish, is Europe finally kicking Greece out of the Euro. By the time traders realize Greece is the catastrophe that never was, it will be too late to buy the dip and all those reluctant buyers will be forced to chase this market higher. Long-term investors should ignore all the noise, but more nimble traders can make money buying discounted shares from panicked owners if prices stumble in the near-term.

Individual Stocks:

$AAPL – Lacking any headlines, AAPL is mirroring the indexes. There is a chance we could see a small pullback next week after Apple fails to announce anything new and exciting at its developers conference. But the disappointment will likely be short-lived.

FEYE weekly

FEYE weekly

$EBAY – It was a flat day for EBAY as it continues digesting the recent breakout. But the longer we hold above the breakout, the more likely it will stick and continue higher once all the new-high profit-taking is behind us.

$ALGN – Added nicely to its recent breakout. The big psychological and technical test will come when it runs up against $65, a level it failed to overcome at the start of the year. While we should expect a pause, or even pullback, as many sell and short the highs, there is no reason to join the selling as long as we stay above the buy-point.

$FEYE – Keeps edging higher, but this one has a longer road to hoe since it is well off the highs. It will continue to encounter selling pressure from regretful owners as it climbs higher, but this recent breakout pushed us clear of the post-IPO consolidation and all those buyers are now sitting on profits. While we are still 50% off the highs, most owners are sitting on profits and more comfortable waiting for higher prices.

Jani

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Tags: $S&P500 $SPY $SPX $AAPL $EBAY $FEYE $ALGN

 

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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.

joseph bauer June 3, 2015

“buy the dip”…….all you mentioned it hasn’t moved…remember “20 point range…..

Help!!!!!!!!

    Jani Ziedins June 3, 2015

    Sorry for the confusion. Buying the dip was referring to knee-jerk weakness immediately following an announcement that Greece is leaving the Euro. That panic will be our opportunity to buy.

Frankp229 June 4, 2015

“After Apple fails to announce anything new.” I love how certain you are. Apple might be the most opaque company on the planet both to the benefit and lately, imo, to the detriment of investors. So nobody knows anything. I really hate how it sells off when things that were nothing more than rumors to begin with dissipate or are ‘proven’ untrue (without comment from Apple, yet again) and the stock sells off. So you do not know for a fact they’re not announcing anything new. Stop acting as though you do.

    Jani Ziedins June 4, 2015

    I’m a longtime Apple customer and been watching these presentations long before the original iPhone. They used to be able to surprise us back when Apple was a much smaller company. But now there are so many leaks in their supply chain we haven’t been surprised by a new product in years. The only thing we didn’t know ahead of time about iPhone 6 was what they would call the bigger model. The iWatch was the worst kept secret and the only surprise was that they didn’t call it the iWatch. Everyone was talking about the Apple’s tablet months ahead of its announcement and they only thing the experts argued over was whether it would be the iPad or the iSlate. But yeah, you keep waiting for that next revolutionary thing that Apple’s been able to hide from us.

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