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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 spent most of the day ever so slightly in the red, but that 15-point dip couldn’t stick and this stubbornly bullish index finished near breakeven.
No doubt this rally cannot remain this easy and brainless for much longer, but as long as it continues trading well, there is no valid reason to argue with what is working.
Trading is hard enough and we don’t need to make it harder by arguing with the market. Keep following the index higher and lift our trailing stops. This will run out of momentum at some point, but it will go a lot higher than most people think before it does.
GME‘s latest flirtation with $200 is ending in disappointment. I was impressed with how well the stock was holding near $200 and that often indicates the stock wants to break through resistance. But there always comes a point where resting turns into stalling. As I wrote last week:
GME has clearly crossed the tipping point into stalling and things are not looking good for the stock. This is why it is so important to wait for the breakout before committing. One, it requires the stock to demonstrate its strength before we put our money at risk. And two, it creates a clear stop loss level to protect our backside.
If GME cannot arrest this fall in a real big hurry, expect the selling to accelerate and for prices to tumble under $100 in the blink of an eye.
This remains a strong short until it gets above $200.
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By Jani Ziedins | Weekly Analysis
Free Weekly Analysis:
The S&P 500 added 2.7% last week with all of those gains pushing the index even deeper into record territory.
As I’ve been saying for a while, this is a strong market and by nature, strong markets go up more than they go down. And in this case, a lot more up than down.
A little over a year ago the index bottomed at 2,190 as fear of a global lock-down climaxed. But as is usually the case, reality turned out less bad than feared. Stock prices recovered from those oversold levels and the index now finds itself 90% above those Covid lows. And not only did we bounce back, but the index is actually 22% above those pre-Covid highs!
As crazy as this sounds, Covid has been very bullish for stocks. Chalk it up to government stimulus and ridiculously low-interest rates. But as far as the economy goes, the Covid lockdowns were little more than a bump in the road, and in fact, many consumers are sitting on such large piles of money they are bidding up the prices of houses and draining auto dealer inventories. Most businesses are struggling to keep up with demand and their biggest problem is keeping inventory in stock!
Is this economy build on a house of cards? Will inflation come along and knock everything down? Maybe. But here’s the thing, as independent investors, we don’t need to predict the future. The greatest strength we have is the nimbleness of our size. We can jump in and out of the market with a few mouse clicks. What happens next week, next quarter, or even next year isn’t material to us. As soon as this bull market runs out of gas, we get out.
There will be the inevitable false alarms and we will get shaken out by a few whipsaws that undercut our stops. But as long as we are willing to get back in, no harm no foul.
I don’t need to predict what the market will do next because I am nimble enough to react to it in real-time. At this point, I’m holding for higher prices and lifting my stops to the lower 4k’s. If prices dip, I get out. If they keep going up, I continue hanging on. It really is that easy.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished Thursday within three points of 4,100. Not bad for an “overbought” market.
It took a couple of months to rally from 3,900 to 4k, but it only took a few days to make the next step to 4,100. But that’s the way this goes; lunge…rest…lunge again…rest again…
I don’t expect this latest breakout to go a whole lot further before falling into the next consolidation. We will hit 4,100 imminently, but it could be a while before we get to 4,200. As the saying goes, two steps forward, one step back.
That said, as long as stocks keep going up, there is only one way to trade this. Keep holding for higher prices and lifting our trailing stops to the lower 4k’s.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Wednesday was another quiet session for the S&P 500 following last week’s 4k breakout.
While most traders are addicted to drama, boring is vastly underrated. Emotional markets produce big moves, unfortunately, most of the time the big action occurs in the wrong direction. On the other hand, boring markets make far smaller moves, but most of them line up in the positive direction. And lucky for bulls, we are in the middle of a very boring market.
Headlines remain benign and stocks continue rallying on “less bad than feared”. Until something changes, stick with what has been working. Hold for higher prices and keep lifting our trailing stops.
The index finished with a small gain but someone forgot to tell TSLA. The electric car maker lost 3% in an otherwise decent day for leading growth stocks.
While we don’t want to overreact to a single day of underperformance, we need to see TSLA lead this market higher, not lag behind it.
Last week’s nice bounce off of $600 support was buyable, but if this underperformance continues, we need to pull the plug and lock-in profits while we still have them. (And if this retreats under $600, that becomes an attractive short entry.)
I’m not giving up on this stock just yet, but I have it on a short leash.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished Tuesday mostly flat (-0.1%) after spending all day bouncing between small gains and losses. But flat after adding nearly 120-points over the previous three sessions is actually quite constructive.
Everyone knows stocks cannot go up every day, so pinning our hopes on a fourth, fifth, or sixth strong day is unreasonable. But holding all of last week’s 4k breakout and most of yesterday’s strong follow-on gains tells us investors are not rejecting this latest push to all-time highs. Confident owners continue holding for higher prices and few are interested in taking profits at these record-high prices.
No matter what the cynics claim about complacency, as long as confident owners keep holding for higher prices, supply remains tight and it is easy for stocks to keep rallying. As the saying goes, what is high tends to get even higher.
This bull market will fall like all of the others that came before it, but this is not that time. Stick with what has been working and that is holding for higher prices and moving up our trailing stops.
GME is a buy above $200 but it is struggling to close the deal and it cannot get above this key resistance level. Fail to deliver on this obvious breakout and this starts looking more like stalling than resting and we need to be extremely careful.
This is a perfect example of why we must wait for confirmation before jumping in. Sometimes close isn’t good enough and this is one of those instances where it is safer to be a little late than a lot early.
Wait for the $200 breakout and we can buy the bounce for a quick trade, but only after this gets above $200.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 exploded higher Monday morning following last week’s breakout through the psychologically significant 4k level. But this isn’t a surprise, as I wrote last week:
Most of the things cautious investors worry about are still hanging over us (Covid, rising interest rates, elevated unemployment, sky-high stock valuations, etc), but the stock market is no longer bothered by these things. But this is normal as headlines eventually become priced in.
Nervous owners that fear these headlines sell to confident dip buyers who don’t mind the risks. After enough time passes, we exhaust the supply of fearful sellers and prices resume their climb. That’s exactly what happened here. The environment is not great, but we have definitely avoided the worst-case scenarios and less-bad is all we need to keep the rally going.
From a trading perspective, there is nothing to do other than stick with what has been working. I’m holding for higher prices and lifting my stops, now spread across the 3,900s.
We can argue with the market or we can profit from it. I choose profit every single time.
No doubt something will come along and rain on this parade (because it always does), but until we see a series of lower-highs and lower-lows, there is only one way to trade this.
The FAANG stocks finally turned it on are helping propel the indexes to these record highs. FB is back making record highs while GOOGL was already near all-time highs and keeps adding to them.
AMZN, AAPL, and NFLX are a little further back, but that is actually a good thing for us because that means these stocks have more profit potential during their recovery.
I really like FG and GOOGL, but right now, AMZN, AAPL, and NFLX are even more attractive.
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