Menu
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
What a difference a day makes. After falling for three sessions in a row, the S&P 500 came roaring back Friday, adding an impressive 1.9%.
As much as the financial press loves to attribute every zig and zag to some major fundamental catalyst, the truth is the market moved this week for no other reason than it can’t stand still.
The index ran up to 4k last week and that was all the excuse savvy swing traders needed to pull the ripcord and lock in some really nice profits. Their selling triggered reactive waves of follow-on selling as the crowd started to worry that 4k resistance, the 200dma, and 2022’s downtrend line signaled a major top and the market was on the verge of the next big crash.
But as is always the case, when we don’t have a significant and unexpected headline driving the market, the wave of selling exhausted itself and prices bounced.
Lucky for readers of this free blog, this is the exact setup I we were looking for. As I wrote Thursday evening:
[H]eadlines haven’t changed in a meaningful way and this retreat looks like little more than a routine pullback from overhead resistance. While down is down, routine reactions to technical levels rarely lead to big changes in the market’s direction. Think of these as the normal step back that follows every two steps forward…[N]othing has changed and that means this is most likely just another routine buyable dip on our way higher. At least that’s how I’m approaching it until proven otherwise.
Sign up for my FREE email alerts so you don’t miss the market’s next big move
Instead of proving me wrong, the market proved me right in a big way on Friday by rallying nearly straight up. So much for all the fear-mongering and market-bashing going on this week.
But before we pat ourselves on the back too hard, the problem is if this week’s selloff didn’t have the strength to go very far, then we shouldn’t expect Friday’s rebound to carry us very far either. Expect this wave of buying to stall just as quickly as this week’s selling did.
Sometimes we buy the breakout and sell the breakdown. Other times we do the exact opposite. This happens to be one of those opposite times. The market isn’t poised for a big directional move and that means we trade against these breakouts and the breakdowns.
As good as Friday looked, expect the buying to stall over the next few sessions and it wouldn’t be a surprise to see the index retest 3,900 support over the next few weeks.
For savvy traders, this means taking profits when we have them. Everyone that bought Friday morning, move up our trailing stops and even consider locking in some profits proactively because we should be prepared for this choppiness to continue.
Sign up for my FREE email alerts so you don’t miss the market’s next big move
If you find these posts useful, help me out by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 lost 0.8% Thursday, adding more pain to this week’s retreat from 4k resistance. Thursday’s losses leave the index a hair under 3,900, a level that provided support in late November and early December.
While it is hard to find good things to say about a three-day losing streak, the index appeared to find support at 3,900 after an early violation bounced back above this key support level in afternoon trade. The problem is a big chunk of those afternoon claw-backs disappeared by the close and the index finished in the lower third of the daily range.
As I wrote Wednesday evening, I was out of the market and looking to buy the next bounce. I bought a partial position Thursday afternoon and was fully prepared to add more if the index closed near the intraday highs. Unfortunately, the late selloff didn’t allow me to do that.
I’m still holding my initial partial position with a stop under Thursday’s intraday lows. I will add to that position if the bounce resumes Friday morning, but I will pull the plug if the index falls under my stops. This is a pretty straightforward setup for me with limited risk if the selloff continues and a pile of profit opportunity if the market bounces.
As for what I think is coming next, headlines haven’t changed in a meaningful way and this retreat looks like little more than a routine pullback from overhead resistance.
While down is down, routine reactions to technical levels rarely lead to big changes in the market’s direction. Think of these as the normal step back that follows every two steps forward.
At this point, it would take a significant and unexpected headline to send the index back to last year’s lows. And at this point, I don’t see anything that says current conditions are worse than the “less bad than feared” that allowed us to bounce off the October lows.
Now, a big and unexpected surprise could pop up at any time, but savvy traders trade what is happening, not what could happen. And right now, nothing has changed and that means this is most likely just another routine buyable dip on our way higher. At least that’s how I’m approaching it until proven otherwise.
Sign up for my FREE email alerts so you don’t miss the market’s next big move
If you find these posts useful, help me out by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 shed 1.6% on Wednesday as the index continues struggling with 4k resistance, the 200dma, and 2022’s downtrend line.
Retail sales fell 1% in December, and wholesale price inflation slipped to the lowest levels since last winter. The market’s knee-jerk reaction was to buy those headlines in hope of a quicker end to the Fed’s tightening cycle. But the relief was short-lived and prices ended up tumbling nearly 200 points through the session.
Did this morning’s headlines actually change anyone’s mind about the trajectory of the market? Or is this simply some profit taking near obvious technical levels?
The thing to remember about technicals is they should be drawn with a crayon, not a straight edge. These are regions and not specific levels. Bounces and stalls almost always come at some level other than the exact technical levels everyone is watching. Sometimes it is before, other times it is after. But the rarest of them all is a reversal on top of the key level.
To me, this turn-back at 4k looks too tight and clean to be real. I’m not saying that it can’t be real, just that it usually doesn’t work this way. And since trading is a game of probabilities, it is nice to know what outcome is more likely than another.
At this point, Wednesday’s selling looks to me like some profit-taking at the widely followed 4k level followed by waves of reactionary selling as follow-on sellers started fearing another rejection by resistance levels that stymied this market in the final months of 2022.
Real rejection or just another false alarm on our way higher? Lucky for us, we won’t have to wait long to get the answer. A bounce on Thursday and all is forgotten and forgiven. On the other hand, continued selling means lower prices are ahead, but even if that happens, we never stop looking for the next buyable bounce because it could come as early as Thursday afternoon.
All of that said, as much as I’m looking for a bounce from Wednesday’s retreat, I’m a disciplined trader and that means I pulled the plug on my last trade because the market’s retreat undercut my trailing stops. As easy as it is to buy back in, there is no reason to let all of my recent profits escape because I held too long. Buy early, sell early is how l like to play this.
But now that I’m out, I’m itching to get back in and will be looking for a bounce to buy Thursday morning or afternoon. And if not Thursday, then Friday. A bounce is coming, the only question is when.
Sign up for my FREE email alerts so you don’t miss the market’s next big move
If you find these posts useful, help me out by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished the first day back from the long holiday weekend down a modest 0.2%.
Not much happened headlines wise and this continues to be a sentiment-driven market. Given how the index rests nearly 200 points above where it started the year, there has definitely been a thawing of last year’s half-empty way of looking at things.
While the economy is still struggling with some headwinds, we clearly avoided last year’s worst-case scenario and stock prices are rallying on this less-bad-than-feared news.
But for as nice as this 200-point rally looks in the rearview mirror, we are currently struggling with the triple-witching of 4k resistance, the 2022 downtrend line, and the 200dma. Any one of these is more than enough to put the lid on a rebound, and all three of these did exactly that a various points in 2022.
So the question becomes, should we be afraid of another rejection, especially with all three hitting us at the same time?
While there are lots of reasons to doubt this rebound, we trade the price action, not our beliefs and fears. Sure, these hurdles could send prices tumbling back to the lows. But until they actually start doing that, we have to give this rebound the benefit of the doubt.
A trend is far more likely to continue than reverse, and no matter what anyone else says, the trend is higher. Without a doubt, we should expect some choppiness near these significant technical hurdles, but until these resistance levels actually break the market, we should be positioned for the continuation, not the reversal.
The greatest advantage of being an independent trader is the nimbleness of our size. We don’t need to trade the breakdown until after it starts happening. If our trailing stops get hit, we get out. Until then, keep riding this wave higher.
Sign up for my FREE email alerts so you don’t miss the market’s next big move
If you find these posts useful, help me out by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Thursday’s trading session took the S&P 500 on a wild ride, but you wouldn’t know it if all you saw was the day’s modest 0.3% gain.
The extreme volatility kicked off after the monthly Consumer Price Index showed inflation falling for the sixth month in a row. While no one is excited by 6.5% inflation, it sure beats the 9% recorded back in June. And even more impressive, some categories actually saw price declines from November.
While it is premature to claim the inflation beast has been slain, there is enough history to say conclusively inflation is not spiraling out of control. It won’t get resolved nearly as quickly as some are hoping, but we are definitely headed in the right direction.
The most impressive thing about Thursday’s wild swings is how balanced they were. Every bit of down was matched by a bit of up and almost every bit of up was matched by an equally sized bit of down. To the point where within minutes of the close, the index was tracking near breakeven before a minor lift gave us that modest 0.3% gain.
Stocks couldn’t sustain a move on the CPI data because it didn’t change anyone’s mind. Bears were just as bearish as bulls were bullish. Prices don’t move when people don’t change their minds and this morning’s just-right result split the difference.
While it would be easy to call this a tie, in this instance the tie-breaker goes to the prior trend, which is up. In addition, as easily as stocks fall, holding steady is another win for bulls.
It doesn’t look like a lot happened Tuesday, but until something changes, bulls are still in control of this market.
The next big hurdle is the 200dma and 4k resistance. These technical levels proved too much for the market to overcome back in November and December. Will this time be any different? Only time will tell, but until prices actually start falling, we have to keep giving the benefit of the doubt to the rebound.
Sign up for my FREE email alerts so you don’t miss the market’s next big move
If you find these posts useful, help me out by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 added 1.3% Wednesday and the index now finds itself at the highest levels since early December.
So much for Monday’s ugly intraday reversal. But that’s the way this goes sometimes. If this were easy, everyone would be rich. The market frequently throws curveballs at us and Monday was one of those days. Sometimes it has to convince us we are wrong moments before proving us right.
The key to surviving these whipsaws and false alarms is staying nimble and having a solid trading plan. Anyone winging this is getting eaten alive as they keep getting fooled into buying high and selling low. But if we have a thoughtful trading plan that gets us in early and gets us out early, then not only are we surviving these whipsaws, we are actually thriving in this volatility.
As hard as it was to buy Tuesday’s rebound following such awful price action on Monday, that was clearly the right call. And a savvy trader was adding even more money Wednesday morning. Big money came back from Christmas vacation in a buying mood and smart money is following those whales.
Now that the index is well above our entry points, we can lift our stops, making this a low-risk trade where at worst we get dumped out for breakeven.
If we’re right, we make money. If we’re wrong, we lose nothing. It is impossible to beat that risk/reward.
4k resistance and the 200dma are up next. These were stumbling blocks back in November and December. But at this point, the market is acting well and deserves the benefit of the doubt. That means we keep riding this wave until it breaks down. Move stops up and see where this goes.
Sign up for my FREE email alerts so you don’t miss the market’s next big move
If you find these posts useful, please return the favor by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
You must be logged in to post a comment.