Which Side I’m On

By Jani Ziedins | End of Day Analysis

Aug 13
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

On Thursday the S&P500 ended down a modest 0.1% following Wednesday’s gigantic reversal. Thursday started weak, but we quickly found support at 2,080, effectively extinguishing the emotional trade that dominated Wednesday. If the market was vulnerable to a collapse, sellers would have piled on this morning’s weakness and the downward spiral of emotional selling would have resumed. Instead, supply dried up and we traded sideways the rest of the day.

It’s cliché to say “don’t fight the tape”, but fighting this market has practically become a national pastime. Sentiment remains in the toilet by almost every measure. Stocktwits $SPY sentiment had bears outnumbering bulls by 2-to-1. The historically bullish AAII sentiment survey also shows bears beating bulls by a healthy margin. Identical trends are evident in put/call ratios and short interest. And anecdotally it is hard to get away from the bearish hecklers in my blog’s comments and Twitter feed. Everyone loves hating on this “overvalued” market, yet here we stand less than three-percent from all-time highs. When the crowd and the market don’t agree, my money is always on the market.

Jani

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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.

Jon August 14, 2015

I have no bias right now, but I’m curious – couldn’t you just as well say that if the market wanted to rise higher, it would have by now? Doesn’t that interpretation go both ways?

    Jani Ziedins August 14, 2015

    Absolutely!

    There are always two ways to interpret technicals. Buy the breakout, or sell the top of the range. Buy the dip, or sell the weakness. This dichotomy is why we cannot trade on technicals alone.

    Sentiment is the clue that tells us which way to trade the technicals. Currently sentiment and headlines have been exceedingly bearish, yet the market is holding up exceptionally well. That is a bullish sign because prices refuse every excuse to breakdown. All it takes is one piece of good news and we’ll explode higher.

    The opposite scenario is when all the headlines are great and the crowd is gleefully greedy. When the market stops climbing under those conditions, that is when prices are stalling and about to fall.

Investrite August 15, 2015

Cannot get away from being greedy when others are fearful, but committing to large purchases won’t happen just yet.

    Jani Ziedins August 15, 2015

    The best trades are the hardest to make.

barry August 17, 2015

What about a low VIX? Isn’t that an indication of low fear?

    Jani Ziedins August 17, 2015

    2015 has given us the tightest trading range in 65-years, meaning the VIX is actually elevated given how flat the market has been.

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