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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 slipped half a percent Tuesday as it continues digesting Friday’s big gains.
While it is more fun to watch the index stack big back-to-back gains, trading is rarely that easy. But as long as the gains are bigger than the losses, the bulls are still in control.
The two near-term points to watch are Monday’s highs and Friday’s lows. Break through either of these and prices will keep going in that direction. On the upside, 4,200 is easily within reach. On the downside, 4k and the 200dma loom large.
Which will it be? The answer you get largely depends on the speaker’s bias. But for those of us without a bias, the market is trading well right now and that can’t be ignored. Prices bounced twice off of 4,050. If this market was as fragile and vulnerable as the critics claim, the selling would have accelerated, not dried up and bounced.
Minor red days like Tuesday are a normal and healthy part of every move higher. Two steps forward, one step back. Until proven otherwise, we continue giving this market the benefit of the doubt.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished Monday’s session up 0.1%. While it is hard to get excited about such small gains, boring markets are bullish, especially ones following moves as big as Friday’s 1.9% rebound.
Stocks retreat from overbought levels quickly, so the longer we hold Friday’s gains, the more real they become.
This remains a choppy market, and we should expect lots of back-and-forth, but at the same time, something that refuses to go down will eventually go up. The fact we keep holding near 4,200 resistance means we will eventually hit and even exceed this widely followed level soon.
From Friday evening’s free post:
Friday gave us the bounce we’ve been waiting for, and there isn’t much to do other than keep holding, adding more, and lifting our stops. We will be locking in profits soon, but we still have upside left, and it is worth holding a little longer.
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Monday’s price action didn’t change anything. Keep holding Friday’s rebound and make sure our stops are at least as high as our entry points, making this a low-risk trade.
Slow is boring, but I don’t mind boring when it is profitable.
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By Jani Ziedins | End of Day Analysis
The S&P 500 finished Friday sharply higher as Thursday’s second thoughts are ancient history. The index closed up 1.8% following strong earnings from AAPL and a robust monthly employment report.
The cynics claim strong employment is bad for stocks, but the market no longer falls for the “good is bad” argument, and the index reclaimed the previous two days of selling.
As I’ve been saying for months, this is a choppy market and that means big reversals. Rather than jump on the bull/bear bandwagon every time the market approaches one end of the trading range, smart money is getting ready for the reversal.
And this is exactly what I told readers in Thursday evening’s post titled, “Why smart money is getting ready to buy the next bounce”:
[N]ow that the index slipped back near the April lows and the 50dma, we find ourselves on the other side of this pendulum. Rather than aggressively short this weakness, we should be getting ready for the next bounce. For shorts, that means locking in worthwhile profits. For everyone else, that means getting ready to buy the next bounce.
As I said earlier in the week, 4,200 is still very much in play and nothing has changed, the market is simply taking the long road to get there.
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Markets trade sideways 60% of the time, and this is one of those times. I still expect the index to challenge 4,200 over the next couple of weeks, but even that will only amount to a poke above this key level before slipping back into the trading range.
And I fully expect the sideways grind to continue as we transition into the slower summer months. If this market was going to break out or break down, it would have happened. The best play here is trading these small swings, taking profits, and then getting ready to go in the other direction.
Friday gave us the bounce we’ve been waiting for, and there isn’t much to do other than keep holding, adding more, and lifting our stops. We will be looking to lock in profits soon, but we still have upside left, and it is worth holding a little longer.
That said, our stops need to be at or above our entry points. There are zero excuses to allow a winning trade to turn red on us. As easy as it is to buy back in, pull the plug at our stops and then get ready to buy back in, which could be as soon as a few hours later. But as long as the keeps going up, we keep holding and lifting our stops.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 slipped another 0.7% Thursday as traders continue digesting Wednesday’s Fed rate hike.
The Fed did what it said it was going to do and the market’s response has been cool but measured. Prices slipped as some of the most optimistic investors were disappointed the Fed didn’t hint at rate cuts later this year, but in a volatile world where 1%, 2%, and 3% daily swings are not uncommon, -1.4% over two sessions is hardly panic material.
Stocks go up and stocks go down, that’s what they do. Monday evening, I warned readers to start locking in worthwhile profits:
Now is the time to start protecting last week’s profits by lifting stops and even taking some partial profits proactively…The price action looks good, and 4,200 is still very much on the table, but this is the wrong time to be getting greedy and cocky. Anyone doubling down up here is exposing themselves to a very routine step back on our way higher.
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I had no idea the market would shed 100 points over the next three sessions, but that’s how these things go. Always has and always will. Last week was a nice bit of up and we’ve given back all of those profits this week. Easy come, easy go.
I can’t repeat this often enough, this is a choppy market and that means one day’s profits will become the next day’s losses. If we’re not taking worthwhile profits when we have them, we’re not going to have any profits left to take a few days later.
But now that the index slipped back near the April lows and the 50dma, we find ourselves on the other side of this pendulum. Rather than aggressively short this weakness, we should be getting ready for the next bounce. For shorts, that means locking in worthwhile profits. For everyone else, that means getting ready to buy the next bounce.
As I said earlier in the week, 4,200 is still very much in play and nothing has changed, the market is simply taking the long road to getting there.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 slipped 0.7% Wednesday after the Fed raised interest rates 0.25% and suggested future rate hikes might not be needed.
The market initially rallied on the news, but Powell went out of his way to remind investors a decision to pause has not been made and further hikes are still possible. And the biggest let-down is the Fed didn’t give any hints that rate cuts are possible by the end of the year.
As expected, we got some good and some not-so-good. In the end, the market’s modest 0.7% giveback still leaves the index well within the recent trading range just under 4,200 resistance.
Fortunately, readers were ready for Wednesday’s modest reaction because it ended up exactly how I described it in Tuesday evening’s post:
[T]he Fed is not going to surprise us and we will get exactly what most people are expecting. That won’t stop impulsive traders from mashing the buy/sell button in the minutes after the announcement, but after a flurry of impulsive trading, the market will settle down and go back to what it was doing previously, which is consolidating recent gains under 4,200 resistance…
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Corporate earnings have been good enough, first-quarter inflation was moving in the right direction, and the Fed didn’t crash the party. This continues to be a “less bad than feared” rebound and the lack of “worse” is allowing stocks to hold near 52-week highs. Not bad, all things considered.
We get the monthly employment report on Friday, and all indications are it will be more of the same. If something was going to break this market, it would have happened by now. This week’s Fed meeting didn’t change anything, and despite Wednesday’s modest givebacks, 4,200 is still the near-term target.
Keep buying bounces and collecting worthwhile profits when we have them. Volatility remains elevated, but as long as we keep getting more up than down, smart money is betting on this market, not against it.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 took a step back Tuesday, shedding -1.2% ahead of Wednesday’s Fed meeting and rate decision.
Two steps forward, one step back. Nothing unusual or surprising about this price action. As I wrote Monday:
Now is the time to start protecting last week’s profits by lifting stops and even taking some partial profits proactively. We don’t need to harvest a lot, but it is amazing how refreshing it feels to lock in some profits and put our minds at ease. A little security is all we need to ride through the inevitable chop as we continue challenging 4,200 resistance over the next few days and weeks.
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With a nice pile of profits locked in Tuesday morning, we were eagerly looking for the next buying opportunity. And as luck would have it, we didn’t need to wait long before the selling stalled and bounced in mid-morning trade.
As easy as it is to buy back in, there are zero reasons not to take worthwhile profits when we have them. And in many instances, we get back in at lower prices, like we did Tuesday afternoon. (Start small, get in early, keep a nearby stop, and only add to a trade that is working.)
A big portion of Tuesday’s second thoughts was driven by fear of the Fed’s policy announcement Wednesday afternoon. While most people expect a 0.25% rate bump and pause after that, until the decision is locked in, there is some risk. And with the index bumping up against 4,200 resistance, traders were overcome by a bout of second-guessing.
As for Wednesday, the Fed is not going to surprise us and we will get exactly what most people are expecting. That won’t stop impulsive traders from mashing the buy/sell button in the minutes after the announcement, but after a flurry of impulsive trading, the market will settle down and go back to what it was doing previously, which is consolidating recent gains under 4,200 resistance ahead of a move to challenge and even break through this key level.
Nothing changed Tuesday and nothing will change Wednesday. Stick to the plan and that is buying bounces ahead of a move above 4,200 over the next week or two. And as always, this is a choppy market and that means locking in worthwhile profits when we have them. Buy the dip, sell the bounce, and repeat as many times as the market lets us.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 spent Monday dancing around breakeven as traders get used to these new highs. As is often the case, the big gains came early and fast, meaning anyone waiting for last week’s confirmation is left with little more than crumbs.
Luckily, readers of this blog were ready for Thursday’s big pop. As I wrote last week:
The market loves to convince us we are wrong moments before proving us right. As paradoxical as it seems, [last] Tuesday’s bloodbath could actually turn out to be very bullish if the market bounces over the next few days. That’s because this reflexive selling is purging the last of the dead weight and clearing the way for the next leg higher.
Well, wouldn’t you know it, last Tuesday’s bloodbath was, in fact, a false flag that cleared the way for these higher prices.
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As for what comes next, even though the market seemed stalled on Monday, it still has upside remaining, and I expect it to break above 4,200 over the next few days or weeks. Unfortunately, riding this echo won’t be anywhere near as easy, quick, or profitable as catching last week’s 120-point rebound across two sessions.
But that’s the way this goes. The early bird gets the worm, and in this case, that means making the hard trade when it feels certain to fail. Buy when we don’t want to buy and sell when we don’t want to sell…
Now is the time to start protecting last week’s profits by lifting stops and even taking some partial profits proactively. We don’t need to harvest a lot, but it is amazing how refreshing it feels to lock in some profits and put our minds at ease. A little security is all we need to ride through the inevitable chop as we continue challenging 4,200 resistance over the next few days and weeks.
The price action looks good, and 4,200 is still very much on the table, but this is the wrong time to be getting greedy and cocky. Anyone doubling down up here is exposing themselves to a very routine step back on our way higher.
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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
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