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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
It’s been a rough week for the S&P 500 as Thursday’s 0.5% loss makes this four down days in a row.
Monday was Labor Day, making this unofficial start of the fall trading season. It’s been a nice and easy summer and a trend is far more likely to continue than reverse, but if the market’s mood is going to change, this transition in seasons is a good time for it to happen.
There isn’t a quantifiable reason to claim this rally is running out of gas and this week’s dip is different than 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.
As I often write, how we finish is far more important than how we start and by that measure, Thursday’s was an ugly day. Early gains evaporated and the index crashed through 4,510 and 4,500 support on its way to closing near Wednesday’s lows.
I don’t mind red days that finish well above the early lows. In most instances those are bullish signals. But there was nothing bullish about Thursday’s retreat and close at the daily lows.
I had my stops spread across the upper 4,400s and lower 4,500s and Thursday’s pathetic price action squeezed me out. Most likely this week’s stumble will turn out to be nothing more than yet another buyable dip. But for me, it’s been a nice run and that makes this a good time to lock-in some profits.
If the index bounces back above 4,500 on Friday or sometime next week, I’m more than happy to get back in. But as long as it remains under 4,500, I’m more than content watching this from the sidelines.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 lost 0.34% on the first day back from the long holiday weekend. But more importantly, the index remains well above the psychologically significant 4,500 level.
Tuesday’s early selling found support near 4,510 and now that becomes our new canary in the coalmine. Anything above this level and all is fine and dandy. Slip under this level and we need to watch the price action with a more critical eye.
As we have seen all year, it is really hard for any dip to get started when so few owners are interested in selling. As much as conventional warns us about complacent markets, the critics always forget to mention just how long complacency lasts before the collapse.
I have no idea how much longer this rally can keep going, but at this point, it is not showing any signs of letting up. As much as I question the sustainability of this one-way strength, there is nothing to do other than follow the market’s lead. Until something changes, we operate under the assumption nothing has changed.
Near-term support is setting up near 4,510. Keep holding for higher prices as long as the index remains above this level. Slip under 4,510 and it makes sense to start peeling some positions off proactively. But like every other time we sell in an uptrend, we always turn around and start looking for the next buyable bounce, even if it happens a few hours later.
Remember, just because we harvest some profits proactively doesn’t mean we have to give up on a trade. As soon as this starts going up again, we need to be back in.
Tuesday was an ugly day for Bitcoin. The cryptocurrency floated above $52k this weekend ahead of El Salvador’s adoption of Bitcoin as a national currency. Unfortunately, the rollout was glitchy and that caused the cryptocurrency to tumble more than 10%.
Anyone that’s been trading for a while understands “buy the rumor, sell the news”. Is this what we are seeing in Bitcoin? It is certainly starting that way. As long as this remains under $50k, we have to be careful.
It makes sense to take some profits off the table and wait to buy back in after this reclaims $50k.
Buy low and sell high. Even bulls should be wishing for a larger pullback here so they can buy more at lower prices.
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