Why bulls and bears are still getting it wrong and how savvy traders are making money

By Jani Ziedins | End of Day Analysis

Sep 15

Free After-Hours Analysis: 

The S&P 500 tumbled -1.2% Friday on relatively benign headlines.

We got some decent economic headlines from China, while the UAW hit The Big Three with targeted strikes. While the UAW strikes have the potential to affect the US economy if they drag on long enough, The Big Three stocks were actually up during the session, so if their knowledgeable investors are not worried, then the rest of the market shouldn’t be too concerned.

Instead, Friday’s givebacks were nothing more than the routine gyrations of an index consolidating 2023’s impressive gains. Stocks go up, and stocks go down, the same way you and I breathe. This is all very standard stuff. There is no reason to read more into Friday’s dip than that.

Luckily, none of this surprised readers. I wrote the following a week ago, and the subsequent price action played out exactly as expected:

As for what comes next, these swings are vanilla sentiment gyurations and nothing more. Going up and down like this is as natural as breathing for the market. Since the latest wave of selling wasn’t propelled by meaningful and unexpected headlines, it won’t go far and we are nearing the bottom.

That means locking in our short 3x ETF profits and getting ready to buy the next bounce. It will probably take one or two more tests of 4,400 support before we bounce for good, but taking profits a little early makes sure we are in the right spot to take advantage of the next trading opportunity, which is most likely buying the bounce Friday or early next week.

The funny thing is I could be copy and paste last week’s analysis into Friday’s analysis because not one thing has changed.

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As for what comes next, expect more of the same. We are stuck in a trading range between 4,400 support and 4,600 resistance. Until something more meaningful comes along, exepect this sideways chop to persist.

As for trading, that means catching these waves and then taking profits early and often because if we hold one or two days too long, those profits will be long gone.

This is the wrong time to be trading for a big directional move and stubborn bulls and bears will keep getting chewed up. For the rest of us, keep squeezing these profits out of the market a few dozen points at a time. While that doesn’t sound like a lot, make these trades in a 3x ETF and now we are taking about real money, especially for what ammounts to a few days of work.

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.