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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 tumbled 1.1% on Monday and gained 1.8% on Tuesday. So much for all the fear-mongering and panicked selling.
But this outcome was largely expected. As I wrote Monday evening:
The final weeks of the year are vulnerable to increased volatility because big money’s steadying hand already left for vacation. That puts retail traders in control through New Year’s. But lucky for us, these impulsive traders don’t have much money and they run out of ammunition quickly. While they can drive dramatic swings like Monday’s open, they struggle to sustain these moves and they tend to bounce back fairly quickly.
Barely twenty-four hours later and the market already erased all of Monday’s losses. After impulsive retail traders ran out of things to sell, prices bounced. Funny how that works.
As for how I’m trading this, as I wrote last week, I sold a good portion of my trading positions when the first wave of selling undercut my trailing stops. But as soon as I’m out, the first thing I’m doing is looking to get back in. Again, from Monday evening’s post:
Like any good trader, I don’t know when to give up. When the index bounced above Monday’s opening levels and again when it closed fairly robustly, I went ahead and bought more partial positions. And if stocks open well Tuesday morning, I’ll add even more.
Trading around these whipsaws can feel like a waste of time, but it is dirt cheap insurance protecting us against a much larger selloff. While I was fairly certain this latest dip would bounce, I’m not willing to bet my trading account on it. Selling and buying back in is so easy, there is no reason not to do it. Sometimes I even manage to pocket a few bucks buying back in at lower levels.
No one is getting rich arbitraging a handful of points like this, but protection against a larger selloff and actually making a few bucks in the process? It’s hard to beat that risk/reward.
Bitcoin has been mirroring the equity market and this cryptocurrency rallied nicely on Tuesday too. But as I’ve been saying for a while, I’m not interested in this until it gets back above $50k support.
For those that have been reading these posts for a while remember I was saying the exact same thing about $60k back in November. Now that we’re $10k lower, traders that heeded that advice are glad they did.
As I often say, it is better to be a little late than a lot early. Bitcoin will probably get above $50k. But it might need to go through the $30k’s first. There is no reason to ride through that dip if we don’t have to.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 gapped 1% lower at Monday’s open after Biden’s Build Back Better bill died in the Senate and Omicron spread like wildfire over the weekend.
But the selling didn’t accelerate as most owners continued holding their favorite stocks and the index finished the day almost exactly where it started. This definitely counts as a bad day for stocks, but after the dreadful open, the herd did’t rush for the exits and that follow-up stability was nice to see.
The final weeks of the year are vulnerable to increased volatility because big money’s steadying hand already left for vacation. That puts retail traders in control through New Year’s. But lucky for us, these impulsive traders don’t have much money and they run out of ammunition quickly. While they can drive dramatic swings like Monday’s open, they struggle to sustain these moves and they tend to bounce back fairly quickly.
I don’t read much into what retail traders are doing this week, but the price is the price and we have to respect these moves even if we don’t believe they will stick around.
We don’t change our trading plan just because this is a holiday week and little guys are running amok. We sell violations of our stops and we buy the (inevitable) bounces by starting small, getting in early, and keeping stops nearby.
Monday morning’s slump under the opening levels forced me out of my partial positions for a loss, but the potential for this to happen is why Friday’s purchase was only a partial position.
But like any good trader, I don’t know when to give up and when the index bounced above Monday’s opening levels Friday afternoon and actually closed fairly robustly, I went ahead and bought another partial position. If stocks open well Tuesday morning, I’ll add even more. If not, no big deal, I pull the plug and keep watching and waiting for the bounce. Maybe Wednesday.
But the market traded well Monday afternoon, all things considered, and I don’t see any panic in the midday price-action, which is a good first sign.
Bad keeps getting worse in TSLA as last week’s violation of $1k is now testing $900.
This stock is down nearly 30% from this Fall’s highs and is just another reminder that holding too long is just as bad as selling too early.
Always follow highfliers like this with a trailing stop because these things fall even quicker than they rise.
While no one wants to sell their favorite stocks, selling our biggest winners is the only way we make money in this game.
If $900 doesn’t hold, then $800 is up next.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
On Friday the S&P 500 tested and bounced off of 4,600 support for the second time this week.
Between the exploding number of breakthrough Omicron cases and the Fed accelerating taper and rate hikes plans, it was a busy week for financial newsrooms. But for as dire as the headlines seem, the market was surprisingly resilient and remains steady near all-time highs.
Sure, the index finished the week down nearly 2%. But last Friday was an all-time closing high and having traded through 2013’s Taper Tantrum, the market “only” falling 2% after the Fed penciled in three rate hikes next year is actually quite impressive.
If this market was truly overbought and fragile, these headlines could have knocked us down 5% or more in the blink of an eye. The fact it took five whole days to shed a measly two percent is fairly impressive.
The counter point to the above half-full argument is the index is hovering just above recent lows. Fall a little further and that violation of support could unleash a big wave of stop-loss driven selling.
So, the question is if we should be focused on the half-full side of the market or the half-empty?
Well, surprisingly enough, the answer is pretty easy. Above 4,600 is half-full territory and anything under 4,600 puts us in the half-empty side of the glass. Trade accordingly.
While I’m giving the S&P 500 the benefit of the doubt, TSLA’s violation of $1k support this week puts the stock on my naughty list.
I still like this company and stock, but I’m a trader and that means I sell things that are going down. I’m happy to buy this when it bounces, but until it gets back above $1k, I don’t have any interest. And in fact, I actually hope it falls back to $800 support because that gives me even more opportunity to profit from the rebound.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
It’s been a volatile few sessions for the S&P 500 as the index keeps jumping between dramatic up and down moves.
While we’ve been living with elevated volatility since late November, every bit of down has been matched by an equal amount of up. While these fear-mongering headlines and choppy price action are good for Tum’s sales, equities seem to be taking everything in stride.
If there is one thing we know about stock market crashes, they are breathtakingly quick. Stop to ask questions and you get left holding the bag. But here we stand, three weeks from the initial Omicron outbreak and the index is still within 1% of all-time highs. If these headlines were going to break us, it would have happened by now.
To further compound bears’ confusion, Wednesday the Fed told us to expect three interest rate hikes next year. Conventional wisdom warns us that rate hikes are bad for stocks, yet prices surged 1.6% on the news.
As I’ve been saying for a while, a market that refuses to go down will eventually go up. Bears have thrown everything they can at this bull and it keeps shrugging it off. If this was going to crash, it would have happened by now. Argue with this market at your peril.
No doubt this bull will die like all of the others that came before it. But this is not that point and bears will continue getting humiliated by this stubborn bull.
TSLA slipped under $1k support last week and that was our final, undeniable signal to get out. Smart traders were already peeling off profits as the stock slipped from $1,200 resistance, but now that we’re under $1k support, there is no excuse to keep holding.
I’m not giving up on this stock and it will probably make higher highs at some point, but I don’t need to hold through the pullback in the meantime. And in fact, I’m looking forward to buying back in at lower prices.
For the time being, this doesn’t get interesting until it gets back above $1k. Until then, keep watching from the safety of the sidelines.
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