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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Unsurprisingly, the S&P 500’s choppy behavior continued on Wednesday as Tuesday’s midday slump reversed and turned into the highest close in nearly a month. A similar misleading signal came out of last week’s big -1.6% retreat that turned into this week’s big gain.
As I’ve been saying for a while, anyone trading in the direction of these breakouts/breakdowns is getting chewed up by the inevitable reversal a handful of hours later.
Savvy traders are coming to this market as opportunists, not bulls or bears. Buy (or short) the reversal and take profits quickly because anyone bragging about their profits is watching those turn into losses a day or two later.
As soon as you feel good about a position, that is a clear sign it is time to get out while the getting is still good.
No doubt the market can rally for another day or two after finally clearing 4k resistance, but Thursday and Friday will be the time to take profits, not chase prices higher.
Until further notice, this is a choppy market. That means taking profits when you have them because if you don’t, you will be taking losses a few days later.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished Tuesday down little more than a tenth of a percent as the choppy, sideway trade continues.
Not much is going on in the headlines and like a kid with ants in his pants, the market can’t stop moving. But just because we’re moving doesn’t mean we are going somewhere. Every bit of up is followed by a bit of down and we continue consolidating in between 3,800 support and 4,200 resistance.
Headlines are fairly stable and that means few people are changing their minds. Nothing has convinced bulls to sell or bears to buy, which means we are stuck bouncing around current levels. No doubt this will change at some point, but it will take a significant and unexpected headline to break this stalemate. Until that happens, expect more of the same.
Until further notice, buy the bounces, sell the breakdowns, and most importantly, take profits quickly. This is the trade the market is giving us and that’s what we are stuck with. No doubt a bigger, directional move is coming, but it will take a fundamental driver to get us there.
That said, if nothing bad happens, expect the market to drift higher over the next few weeks on less-bad-than-feared relief.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 kicked off Monday morning with nice gains after nothing bad happened over the weekend. Unfortunately, that early push above 4k resistance turned back and the index gave up a big portion of those initial gains by the close.
As I’ve been saving for a while, anyone anticipating a big directional move is getting chewed up by these whipsaws. Friday’s violation of last week’s lows ended in a big bounce and Monday’s push to recent highs was turned back by 4k resistance.
Smart money is trading against these swings, not in their direction. As I wrote Friday afternoon:
Bears were right for a few minutes [Friday] morning, but if they held on much longer than that, they watched all of those profits go flying out the window. And no doubt it will be the bulls’ turn [this] week when we hit our head on 4k resistance yet again. This is the kind of market where if you are not taking profits, you will be taking losses a few hours later.
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Well, here we are Monday afternoon following a rejection by 4k resistance. If someone is surprised by these reversals, clearly they are not paying attention.
Savvy traders see the market for what it is, not what they want it to be. And that simple nuance is the difference between making money and losing money. Bulls and bears need to be right, I just want to make money and don’t care who wins. And that is making all the difference here.
As for what comes next, expect more of the same. Buy the bounce and sell the breakdown. But remember, we only make money when we sell our winners. If you are not taking profits when you have them, you will end up taking losses days, if not hours later.
Stay nimble and ignore everything coming out of bulls’ and bears’ mouths. This is a choppy trading range. Only fools are trading it like it is going somewhere.
If the index bounces above 4k resistance Tuesday or Wednesday, that is a buy signal. If the selling continues Tuesday, that is shortable. And no matter what happens, take profits early and often because if you don’t, the market will take everything back a few hours later and you will be left holding the bag.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 closed Friday up a very respectable 0.6%.
While a half percent gain is normally nothing to get excited about, this finish was actually a great outcome considering the index found itself in a -1% hole shortly after the open when investors got spooked by a run on another European bank.
Stubbornly high inflation, a tight labor market, the fastest rate hikes in a generation, and now a banking crisis. Sounds like a one-two-three-four punch and the market should be down and out for the count. But it looks like someone forgot to tell the market because it is nearly 500 points above the October lows.
As I’ve been writing for a while, this is a back-and-forth market and anyone trading the breakout or breakdown is getting killed by these reversals. As I wrote Thursday evening:
This is the kind of market where if you are not locking in worthwhile profits, you are left taking losses a few hours later. It really is that simple. Greedy bulls and bears are getting killed while savvy and opportunistic traders are printing money.
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One day’s up is turning into the next day’s down. And now it looks like that time frame has been shrunken down to hours. Bears were right for a few minutes this morning, but if they held on much longer than that, they watched all of those profits go flying out the window.
And no doubt it will be the bulls’ turn next week when we hit our head on 4k resistance yet again. This is the kind of market where if you are not taking profits, you will be taking losses a few hours later.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Thursday’s +0.3% finishing print in the S&P 500 fails to convey what a wild ride we took through the session.
A huge opening rally erased all of Wednesday’s -1.7% slump as the whipsaw price action continues. But just when the bulls were the smuggest, demand dried up and the index gave back all of those early gains.
This wild price action shouldn’t surprise anyone. As I’ve been writing for a while, this is a back-and-forth market, not a directional one. Every bit of up is followed by a bit of down. As I warned readers Wednesday evening:
[I]f we are not taking profits early and often, we won’t have any profits left to take. This applies equally to both bulls and bears. This is not a directional market, this is a back-and-forth market. One day’s up turned into the next day’s down. Don’t get fooled into trading the breakout/breakdown, trade the reversal.
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This is the kind of market where if you are not locking in worthwhile profits, you are left taking losses a few hours later. It really is that simple. Greedy bulls and bears are getting killed while savvy and opportunistic traders are printing money.
This market is not breaking down and it is not breaking out, so stop trading like it is. The crowd is losing a ton of money. Lucky for us, their losses can turn into our gains.
Obviously, this pattern cannot last forever, but I don’t see any hints this price action is changing. Keep buying the dips and selling the rips until the market proves otherwise. Remember, lock in worthwhile profits early and often because if you don’t, the market will hand you a pile of losses a few hours later.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 shed 1.6% Wednesday after the Fed increased interest rates by 0.25%.
Two weeks ago the market would have cheered this 0.25% hike because at that point, many people were predicting 0.5%. But a lot can change in two weeks, namely the entire banking system falling under threat.
Because of the threat posed to banks, the Fed went ahead with this more measured 0.25% increase despite February’s hot employment report and stubborn inflation data.
But rather than cheer the Fed’s moderate step, investors got cold feet and started dumping stocks Wednesday afternoon.
Lucky for us, this giveback was not a surprise. As I wrote Tuesday afternoon following that day’s big surge higher:
Will this relief last? No, probably not. That’s why savvy bounce buyers are standing near the exits and even locking in some worthwhile profits proactively as we challenge 4k resistance.
Remember, we only make money when we sell our winners and this remains a choppy market. As I’ve been saying for a while, if we are not taking profits when we have them, then we will be taking losses a few days later.
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While I was taking profits before the Fed announcement, that wasn’t because I feared a big retreat. As bad as Wednesday’s 1.6% givebacks felt, this only brings us back to Monday’s close. That’s hardly panic material.
Sure, stocks can always fall even further, but we need a new and unexpected reason to crash to fresh lows and the Fed matching expectations is hardly new or unexpected.
Until further notice, continue trading this market as if it is rangebound. That means buying weakness and selling strength.
As I wrote Tuesday afternoon, if we are not taking profits early and often, we won’t have any profits left to take. This applies equally to both bulls and bears. This is not a directional market, this is a back-and-forth market. One day’s up turned into the next day’s down. Don’t get fooled into trading the breakout/breakdown, trade the reversal.
Wednesday’s close was ugly, but we didn’t learn anything new, so expect the selling to dry up fairly quickly. If you are short, be ready to take profits soon. If you’re in cash, that means getting ready to buy the next bounce.
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