Monthly Archives: September 2021

Sep 21

A quick update on Tuesday’s pathetic price action and what to expect next

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 started Tuesday well enough, opening in the green and extending Monday’s late bounce. But by the end of the session, the index gave back all of those early gains and finished flat.

While flat is clearly better than extending the selloff, it didn’t do anything to end the selloff. And unfortunately, that means the selloff is still alive and well.

As I wrote previously, this decline turned into an emotional selloff and we rarely shake those off within a few days. More often than not, it takes weeks and even months to get back to the old highs. To get these things through our system, most of the time we need to go “too far” before we can bottom and bounce for good. Tuesday’s weak rebound tells me we haven’t reached “too far” yet and we need to prepare ourselves for lower prices over the near term.

The only question is if we minorly violate Monday’s lows or if we smash through them and keep going. At this point, I could see either scenario playing out and that means our trading plan needs to be prepared for both.

Hopefully, everyone reading this blog has their trading account sitting in cash and is ready to pounce on these discounts. If the index falls under 4,300 over the next day or two, bouncing back above this level becomes an excellent entry point with a stop just under this level.

Remember, start small, get in early, keep a nearby stop, and only add to a trade that is working.

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Sep 20

Has the market’s mood finally soured and what that means for the rest of the year. Plus a Bitcoin trade.

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Monday was the ugliest session in a long while for the S&P 500 and only a late bounce off the midday lows saved it from being the worst day of the year.

Financial journalists blame this weakness on real estate problems coming out of China. But the thing to remember about journalists is if they could trade, they would be traders, not journalists…

While this property bubble story out of China sounds plausible, it’s been years since U.S. markets cared about what’s going on inside China’s economy and nothing changed this weekend.

Readers of this blog know the real answer is this “unstoppable bull” was setting up to run into some headwinds this fall. We didn’t know what “the problem” was going to be, but we knew it was coming. Markets move in waves and if it wasn’t China, it would have been something else. It was simply time.

Now that we got that out of the way, it is time to figure out what comes next. All of the other dips this year bounced within days, if not hours. Should we expect the same thing this time? Nope, not at all.

This time is different because it is the first dip that truly sent fear and indecision racing through the crowd. Previously every dip was met with a shrug and prices bounced within hours due to the lack of follow-on selling. That confidence is long gone and everyone is now wondering if this is “the big one”.

As for what comes next, it takes a while for emotional selloffs to work their way through the system and we shouldn’t expect this one to bounce back to the highs anytime soon. In fact, there is a good chance we’ve seen our last record high this year.

The market’s mood has clearly changed and that means the half-full outlook has been replaced by nervousness and second-guessing. Fear of the other shoe dropping will keep traders on edge for weeks, if not months.

Monday’s intraday lows near 4,300 set a new benchmark to keep an eye on. Above this level and an adventurous trader can buy a near-term bounce for a quick buck. But take profits early and often because we will retest 4,300 again over the next week or two, if not later this week.

Expect a few violations along the way, but anytime we get back above 4,300, that qualifies as a buyable bounce. Maybe it doesn’t amount to much, but if we start small, get in early, the risk is almost zero the potential reward is quite large.

And if this thing keeps falling, even better. The lower prices go, the better the discounts get. (You are in cash right?)

Bitcoin continues failing as a hedge against volatility in the equity market. This cryptocurrency fell along with everything else today and no one was safe.

Nimble traders had their trailing stops get them out closer to $50k and now these savvy opportunists are eager to take advantage of these discounts. A bounce off of $40k is buyable, but all bets are off if this falls under $40k. Plan your next trade accordingly.

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Sep 17

The warnings this week was shouting at us

By Jani Ziedins | Weekly Analysis

Free Weekly Analysis:

The S&P 500 finished the week 0.57% in the red, making this the first time we’ve had two consecutive down weeks since May.

The good news is that two week selloff back in May was nothing more than a minor hiccup on our way higher and the next three weeks finished green. Will we be as lucky this time? That’s the million-dollar question.

The most notable difference between this week and that episode in May is this week ended at the weekly lows while back in May, that second week finished near the weekly highs.

As I often write, it isn’t how we start but how we finish that matters most. And in this case, this Friday afternoon gave us a very poor finish.

The market attempted several bounces over the last two weeks and each one ended in disappointment. Markets bounce decisively from oversold levels and this week’s pathetic rebounds tell us we are not yet oversold. And if we know anything about emotional pullbacks, it’s that they don’t give up until they’ve gone too far. Quite simply, if this market isn’t oversold yet, then the selling isn’t over.

I still like this market even though I am approaching it with a lot more caution given the changing seasons. But I’m still treating this as a buyable dip. Friday’s violation of the weekly lows was a clear signal to get out. But that line in the sand now becomes our next buy signal. Bounce back above this level next week and it is time to get back in. Start small, get in early, keep a nearby stop, and only add to a trade that is working.

We will know pretty early in the week if this market wants to bounce or continue falling. Rather than try to predict what it will do, savvy traders simply wait and follow its lead.

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Sep 16

The calm before the storm? Or the worst already passed?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 continues flirting with recent lows near 4,430 for the fifth day in a row.

To breakdown or not to breakdown, that is the question.

The thing about breakdowns is they typically fall hard and fast. Five days of grinding sideways isn’t hard and it isn’t fast. Does that mean the selloff is already over? The market sure is acting like it.

Lucky for us, we have a very clear line the sand near Tuesday’s lows that will tell us if and when this week’s bounce fails. Fall under this level and get ready for more selling. Hold above it and the rebound is alive and well. Above is buyable. Under is sellable. It doesn’t get any more straightforward than that.

But the market doesn’t like being easy, so the curveball might be a momentary violation of 4,435 support before bouncing back above. In that instance, the return above 4,435 is buyable and the rebound is back on.

Pundits are trying to convince us they know conclusively that this is either a bounce back to the highs or the start of a much lager selloff. Me, I don’t know and I really don’t care. I trade what the market gives me. If that means buying the bounce, then I buy the bounce. If it means shorting a bigger breakdown, then I short the bigger breakdown.

Following the market’s lead sure beats trying to win an argument when it isn’t listening.

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Sep 15

Nice bounce, but can we trust it?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Wednesday was the first real good session for the S&P 500 in nearly three weeks. The index arrested a nearly two-week-old slide, bouncing nicely off of the 50dma and adding 0.85%

Is this the real bounce, or just a false bottom on our way lower? Unfortunately, only time will tell and we won’t know the answer until long after this trading opportunity passed us by. Sometimes the first bounce is the real deal, but often it takes two or three false starts before turning for good and Wednesday was only the first attempt.

But just because we don’t know if this is the real bounce or not doesn’t mean we cannot trade this move intelligently. When I have no idea if this is the real bounce or not, I trade it as the real thing until proven otherwise.

Reclaiming 4,460 this afternoon was a nice entry point and closing above 4,480 gave us another entry. As for stops, hold above Tuesday’s lows near 4,350 and everything looks good. Fall under this key support level and all bets are off. Easy as that.

I have no idea if this bounce is the real bounce, but I have a plan and I’m trading it. And if this isn’t the real bounce and the slide continues, no big deal. I simply get out and buy the next bounce. In fact, the lower this goes over the near-term, the better it is for me because the larger discounts give me more profit opportunities during the subsequent rebound. That makes this is one of those times I hope I’m wrong.

As always, start small, get in early, keep a nearby stop, and only add to a position that is working. If the market rallies Thursday, move stops up to our entry points, giving us a free trade.

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Sep 10

Is the index standing on a trapdoor?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Friday makes it five down days in a row for the S&P 500.

That’s the longest stretch of down days since February. And for those that care about these things, the last time the index fell five days in a row, it ended up falling another 4% before finally finding a bottom. If history repeats itself, we could see the index fall another 200 points over the next week or two. As I said, this only matters to people that care about these things, so please feel free to disregard this if it isn’t relevant to you.

As I warned readers on Thursday:

There isn’t a quantifiable reason to claim this rally is running out of gas and that this week’s dip is different from all of the other failed dips this year. But just knowing where we are and where we’ve come from, it feels like this time could be different.

Well, Friday’s pathetic price action confirmed this time is different and that means we haven’t seen the worst of this dip yet.

Unfortunately in trading, we have to make our moves before we have all of the information. Often that means pulling the plug days before something is obvious. Anyone still waiting for confirmation on Monday or Tuesday will be selling long after the damage has been done. By that point, why bother selling at all?

Smart traders buy early and they sell early. Suckers buy late and sell late. Please don’t be a sucker.

For those that have been paying attention, we moved to cash Thursday and waiting for that next buyable entry point. Odds are good stocks will bounce on Monday. But most likely that will be a fool’s bounce and lower lows are still ahead of us.

There is nothing wrong with buying Monday’s bounce if we are smart about it (start small, get in early, keep a nearby stop, and only add to a trade that is working). But odds are good Monday’s bounce will turn out to be a false bottom and we need to be nimble if we buy it. Most likely the selling will resume later next week before we finally carving out a more painful capitulation bottom.

But if we are savvy and nimble, we buy all of the bounces because we know we can get out when those false bottoms fizzle and start making fresh lows.

I have no idea if the first, second, third, or fourth bounce will turn out to be the real bounce. That’s why I buy all of them and then I don’t have to worry about it. (again, start small, get in early, keep a nearby stop, and only add to a trade that is working)

While some people hate volatility, I love it because that’s the fastest and easiest way to make money.

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