Monthly Archives: May 2021

May 28

How long until the S&P 500 finally leaves 4,200 behind. Plus, a sensible strategy for trading Bitcoin’s latest dip.

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Thursday 0.88 points above the psychologically significant 4,200. Friday it bested this key level by 4.11.

As trivial as these gains seem, the most important thing is we continue holding near record highs. Markets collapse from unsustainable levels quickly. Holding here all week confirms there is meaningful demand at these levels. As I often write, a market that refuses to go down will eventually go up.

While counting profits as the index races higher is more fun, sideways grinds are a normal and healthy part of every sustainable rally. And you know what, so are dips. Nothing ever goes straight up and that includes this stubbornly resilient bull market.

Looking back at recent history, it took us three months to go from 3,600 to clearing 3,800. There was another three months between 3,800 and the 4k breakout. And counting back from today, we are about two months into the current 4k breakout. If history repeats itself a third time, we should be prepared to wait for another month before finally leaving 4,200 behind.

The index is acting well, but we need to keep our expectations in check and that means being patient a little longer.

Bitcoin slipped back into the mid-$30k’s after flirting with $40k resistance over the last few days. It’s been a rough few weeks as the cryptocurrency shed nearly 50% of its value after Elon Musk renigged on his promise to accept bitcoin at TSLA.

While the $30k bounce was buyable, we really need to see this reclaim $40k support to help put investors at ease. If we cannot get there, a test of $20k support becomes increasingly likely.

If a person bought the $30k bounce, you can keep holding. But if a person is still in cash, wait for a second bounce off of $30k or hold off on buying until this reclaims $40k. Buying anything in the mid-$30k’s is no man’s land and leaves us vulnerable to near-term losses. And if this falls under $30k all bets are off and it is time to abandon ship because this could fall another 30% before finding support at $20k.

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May 27

Does 4,200 matter? Plus a FB update.

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Thursday up a fairly trivial 0.12%. That said, it was enough to let the index close above the psychologically significant 4,200, if only by 0.88 points.

Does 4,200 really matter? While round numbers always sound nice, in reality, this is just another level and is no different than 4,199 or 4,198. More important than some number that ends in a double zero, now we can move on. From here, 4,200 simply turns into another minor milestone disappearing in the bull market’s rearview mirror.

Inflation worries are gone for now, but no doubt they will be back. And inflation might even cause the demise of this bull market. But that’s an issue for another day. Until then, we trade what’s right in front of us and that is riding the rally higher. With 4,200 down, the next stop is all-time highs.

As I often say, a market that refuses to go down will eventually go up.

FB is on fire and closed at all-time highs. So much for the post-election drama hanging over this stock.

And you know what? Stocks that are high tend to get even higher. No reason to give up on what has been working. Keep holding for higher prices and lifting our stops.

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May 26

Is the index stalling or resting? Plus, what to make of GME’s pop.

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Another day, another finish short of 4,200. As well as the index has been trading, it sure is having a heck of a time getting above this psychologically significant level.

As I wrote subscribers earlier today:

Stalling before the fall? Or pause before the next rally?

While both scenarios could easily play out, until proven otherwise, we continue giving the benefit of the doubt to the rally. Holding near the highs is a sign of strength, not weakness. While I would get concerned if we cannot get above 4,200 over the next few weeks, pausing at these levels for a handful of days is a very normal and healthy thing to do.

More important than the lack of follow-on buying is the absence of contageous herd selling every time stocks dip. The market is acting well and the path of least resistance remains higher.

GME smashed through $200 resistance Tuesday afternoon and that surge of buying continued Wednesday. This breakout is very much buyable, but a person has to have an iron stomach, be incredibly nimble, and view this as a very short-term trade. Take profits early and often because they won’t last long.

As I wrote previously:

Wait for the $200 breakout and we can buy the bounce for a quick trade, but only after this gets above $200.

Tuesday was that day and now we’re sitting on 20% profits. Not bad for a few hours of “work”. But don’t get complacent, this thing falls even faster than it climbs. Be ready to take profits at the first hints of trouble and no matter what, do NOT let this trade slip into the red. This could be the last time this stock gets to these levels.

Profit from the hysteria, but don’t fall for the hype.

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May 25

Why both bulls and bear are trading the S&P 500 wrong, plus how to respond to NFLX’s bounce

By Jani Ziedins | End of Day Analysis


Free After-Hours Analysis: 

The S&P 500 slipped a modest 0.2% Tuesday and while that size of a decline seems fairly trivial, it is notable this was the second day in a row the index failed to hold early gains above 4,200.

This counts as one of those half-full, half-empty kinds of days. On the positive side, the index remains within a handful of points of all-time highs. Not bad given how unnerved traders felt a couple of weeks ago when inflation worries dominated the headlines. On the other side of the coin, the previous two pullbacks started with rejections by 4,200 resistance. Are we witnessing the start of the third pullback?

Is this just another insignificant hiccup on our way to record highs? Or are we on the verge of the next test of 4k support?

To be honest, I could see either outcome playing out. While bulls and bears are busy arguing why their analysis and outlook is superior to the other side’s, I’m over here crafting a trading plan that accounts for both scenarios. Why pick one or the other when we can have both!

At the moment, I’m riding this wave higher with stops in the mid-4,100s. Buying last week’s dip early gave me entry points at much lower levels and that affords me the flexibility of riding this out with a “free” trade. If this goes higher, great, I collect those profits. If this dips back to 4k support, I get out at my entry points (making this a “free” trade) and I buy the next bounce at even lower levels. Either way, I win. (In fact, a bigger decline here gives me even more profit opportunity buying the next rebound.)

The key to surviving and even thriving during periods like this is trading proactively and decisively. By getting in early, we have a whole lot more options.

NFLX reclaimed $500, making this a buyable bounce. But the subsequent price action has been fairly lethargic. Fall back under $500 and not only does it make sense to close the long, but this turned back into an attractive shorting opportunity. Hang out near the lows long enough and inevitably, we start making even lower-lows.

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May 24

Why this bull market is doing exactly what it should be doing, plus what the FAANG stocks are telling us

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Monday was a good session for the S&P 500 as it added 1% and pushed up against 4,200 resistance.

The index has been flirting with this key level since April and up to this point, it has been unable to hold above it for any length of time. Monday was no exception with a midday push to 4,209 slipping back to 4,197 by the close.

Should we be worried about the market’s inability to close the deal and put 4,200 in the rearview mirror?

Everyone knows markets move in waves and this is especially true following big directional moves. The index broke through 4k for the first time on April 1st and then it sprinted to 4,200. A 5% surge in two weeks is downright impressive and a little sideways consolidation was the most obvious next step. And that is exactly what the index has done since mid-April.

So I ask again, should we be worried about the market’s inability to close the deal and put 4,200 in the rearview mirror? No, of course not.

This sideways consolidation is very normal and healthy behavior following a big and fast move. In fact, I would be far more concerned about the sustainability of the bull market if that 5% move continued to 10% without taking a break.

Resting here is the right call and it sets a solid foundation for the next leg higher.

As I often write, something that refuses to go down will eventually go up and that is the case here. As hard as bears are trying to break this market, they cannot get the job done. Their failure becomes our gain.

Keep holding for higher prices and lift our stops once the index gets above 4,200.

Monday was a good day for the FAANG stocks, especially FB and GOOG. These are the biggest and most important stocks in the market and their underperformance has been weighing on the entire market. If their recent outperformance continues, expect these stocks to lift the entire market. If their underperformance resumes, expect them to drag all stocks down.

These highflying stocks are the canary in the coalmine and if they start struggling again, all investors need to be paying attention. Let’s hope it doesn’t get to that.

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May 21

Why bulls should be rooting for a bigger stock pullback, plus how much lower this Bitcoin selloff can go

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slipped for a second week in a row. But for as ominous as things appeared Wednesday morning, the 0.43% weekly loss seems fairly benign.

This was the second week in a row bears tried to break this bull and the second week in a row they failed to get the job done. Dips in the first half of the week bounced decisively in the second half. And here we stand, within 2% of all-time highs following two weeks of robust selling. As I often write, a market that refuses to go down will eventually go up.

That said, there are no guarantees the second bounce is the end of this volatility and we could easily experience another test of 4k support next week. But if the first two attempts couldn’t close the deal, odds don’t look good for a third attempt. (Often the 3rd bounce is the charm!)

As has been the case all along, keep holding for higher prices, pulling the plug at our stops, and being ready to jump back in when the dip proves to be yet another false alarm. While trading through these whipsaws is inconvenient, it sure beats holding blindly through a much bigger correction. While the next dip will most likely bounce like all of the others that came before it, there are no guarantees and I certainly don’t feel like betting my trading account on it.

And in fact, I’d rather be wrong and see the index fall significantly further. The lower this goes now, the more money I make buying the next bounce.

I normally like to mix up these individual analysis pieces and spread them across different stocks, but Bitcoin is just too juicy to ignore. Thursday’s bounce above $40k support failed and this is back in the mid-$30k’s. If BTC cannot get back above $40k soon, we could very easily see prints that start with a $2#,###.

As I’ve been writing all along, with something this volatile, we need to have a stop and we need to stick to it. $60k was a sensible level to lock in profits. So was $50k and more recently $40k. And now there is a good chance people will be kicking themselves for not selling at $30k.

I’m not giving up on Bitcoin, but this has a nasty habit of falling 80% and that means this might not bottom until $12k! While this also has a habit of bouncing back, don’t forget last major selloff took three years to get back to the old highs. Just think about that when deciding if you want to hold through the dip.

Even the most bullish of bulls can see the value of selling $60k and buying back in at $12k.

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May 20

Why savvy traders are buying this bounce, plus the simplest trade for Bitcoin.

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Thursday was a good session for the S&P 500 as it extended Wednesday’s rebound off of recent lows.

So what is this, a bull market breaking down or a rally getting ready to make new highs? Depending on the hour, you are likely to find widely differing opinions.

As I’ve been saying for a while, until given a compelling reason to change our outlook, we continue giving this bull market the benefit of the doubt. This bull market started in March 2020 and every wobble since then has been a false alarm. While the cynic will claim the end is coming (and he will be right…eventually), this rally bounced more than a dozen times and is up nearly 100% from the Covid lows. Anyone who pulled the plug early has missed out on a lot of easy money.

That said, I’m never one to blindly hold “no matter what”. I’m in the market when it is going up and I step to the side when it slips under my trailing stops. When the dip turns out to be a false alarm, I get back in and do it all over again.

Will this week’s rebound stick? Maybe. Or maybe it fizzles and retests recent lows. Either way, I’m ready for what comes next. I bought back in yesterday and by acting early, I am already lifting my stops up to my reentry points. Few things are better than free trades.

I still like this bull market, but if this week’s bounce fizzles, I will get out at my stops and try again next week. No harm, no foul.

Bitcoin finds itself at a critical juncture. Buy the bounce above $40k and short the break underneath it. As much as people want to debate the fundamentals, this is nothing more than a sentiment trade and either prices bounce or they don’t. Plan your next trade accordingly.

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