All Posts by Jani Ziedins


About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and writer who has successfully traded stocks and options for more than a decade. He earned a B.S. in Mechanical Engineering from the Colorado School of Mines and an MBA and M.S. Marketing from the University of Colorado Denver. His prior professional experience includes manufacturing engineering at Fortune 500 companies, structural engineering, small business consultant, collegiate instructor, 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 young children.

Feb 20

What’s coming next, new highs or new lows?

By Jani Ziedins | End of Day Analysis

End of Day Update:

After six days of gains, the S&P500 finally slipped into the red Tuesday. The size of the loss was insignificant when compared to last week’s rebound, but seeing the market bump its head on the 50dma was insightful, even if the pause was expected.

Financial headlines continue to be benign and most traders are focused on the longer-term ramifications of rising interest rates and inflation. Fears over these items sparked February’s sharp selloff, but have since failed to extend the selloff. It seems most traders who fear higher interest rates and inflation already sold and were replaced by new owners willing to hold those risks. While the recent correction rattled investor nerves, it didn’t shatter confidence and most owners are confidently holding for higher prices.

That said, February’s selloff was large enough that we cannot bounce back like nothing happened. Deep and emotional selloffs leave their scars and it takes a while for prices to build back to their previous levels. We recovered a huge chunk last week, but the rate of that rise was unsustainable and pausing at the 50dma is a normal and healthy thing to do.

We put enough time and distance from the dip’s lows to say the early February selloff is over. Market crashes are breathtakingly quick and almost never include six consecutive up-days in the middle of the crash. Without a doubt we can undercut those lows, but it will take a new catalyst to kick off the another leg lower and it will be a new selloff, not an extension of February’s emotional selling.

But just because the selloff is over doesn’t mean we are back in rally mode. We often see volatile trade during consolidations and base building. That means sharp rebounds followed by another round of selling. It wouldn’t be unusual or unexpected to see last week’s rebound stall at the 50dma and retreat back toward 2,600 support. Emotions are elevated and that means traders oscillate between believing everything is great to fearing the end of the world. This wide range of emotions leads to the bounces and dips that form traditional bases and consolidations. In range bound markets, it is best to trade against the market by buying weakness and selling strength. Don’t let the crowd’s emotions trick you into giving away money by buying high and selling low.

This isn’t rocket science, we just need to be pay attention because the market keeps doing the same thing over and over. In January I warned readers the relentless rise in prices was unsustainable. After February’s 10% correction, I told readers the selling went too far and it was actually the safest time to buy in months. And after six consecutive up-days, I warned readers that we would stall at the 50dma. This isn’t hard if you know what to look for. And to answer the question in this post’s headline, neither. This is a range bound market we shouldn’t expect a strong directional move anytime soon.

Bitcoin’s rebound continued over the weekend and got near $12k. Everything looks a lot better after a 100% bounce off of the lows. But that is what makes me nervous. The time to buy is when everyone is predicting a collapse, not when everyone is feeling better.

This rebound took a lot of pressure off of BTC owners, but we will start running into overhead resistance. Many premature dip-buyers jumped in between $12k and $15k and we should expect many of those regretful owners to sell when they can get their money back. Their selling will slow the assent over the near-term.

Over the medium-term, I question where the next round of BTC buyers will come from. This latest selloff burned new investors and scared off prospective investors. On the other end of the spectrum, BTC bulls bought everything they could during this dip and are now fully invested. Where does the new money come from? I cannot answer that question and is why I don’t believe the bottom has been put in yet. Previous BTC selloffs erased more than 80% of the value and took more than six months to complete. If we do the same this time, we won’t bottom until we fall under $4k and it won’t happen until sometime this summer or fall.

Until further notice, BTC is still in a downtrend and that means bounces should be sold.


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Feb 15

Why this “irrational” market is perfectly rational

By Jani Ziedins | End of Day Analysis

End of Day Update:

The S&P500 extended last Friday’s rebound and reclaimed the 50dma. This marked the fifth consecutive day of gains and firmly puts last week’s selloff in the rearview mirror.

A week ago the market collapsed on fear of rising inflation and interest rates. This week we got further data showing inflation was heating up, yet this time the market rallied. What gives?

As contradictory as those two responses seem, there is actually solid logic behind the market’s “irrational” behavior. Last week nervous owners abandoned the market and kicked off a dramatic correction. But here’s the thing about sellers, they only get to sell the market once. After that they no longer have a say in what comes next. Nervous owners sold inflation headlines and dumped their stocks at steep discounts. Confident dip-buyers snapped up those discounts. Out with the nervous and in with the confident.

These confident dip-buyers bought last week during the height of the inflation scare, so another round of inflation headlines this week were unlikely to scare them. Turnover in ownership is how headlines get priced in and why they stop mattering. Once all the people who fear inflation are out of the market, there is no one left to sell the next round of inflation headlines. No sellers means no selloff.

When people claim the market is acting irrationally, what they are really saying is they don’t understand what is going on. There is always sound logic behind every move. If we don’t understand it, all that means is we need to dig deeper. (Sign up for Free Email Alerts if you want to understand what the market is doing before everyone else)

Thursdays gains pushed the S&P500 back above the 50dma and recovered half of the selloff. In a normal market, I would be worried about the sustainability of this rebound. Typically the market remains choppy after a dramatic selloff. But this market continues to surprise us with its ability to defy conventional wisdom. January’s nearly straight up rise lasted longer that it should have. Last week’s selloff went further that it should have. And now there is a good chance the current rebound will also surge far higher than expected.

Even though we keep going up, that doesn’t mean this is a good place to buy. The risks have changed dramatically from last Friday’s lows. The best buys occur when the crowd is terrified things will get worse. Last Friday most definitely qualified as a great buying opportunity and that is exactly what I told readers of this blog the night before. But this week we find ourselves in the middle of a market filled with relief. While we are still well under January’s lows, long gone is last week’s doom and gloom. Even though momentum can keep us rising over the next few days, that doesn’t make this a safe or smart place to be buying. If someone missed the rebound, chalk it up as a lesson learned. Remember, it is better to miss the bus than get hit by the bus.

Those with swing-trading profits should start thinking about locking them in. Those with cash should sit on their hands and wait for a better entry point. And long-term investors should stick with their favorite stocks.

Bitcoin finally traded above $10k, making this a 66% bounce off of the $6k lows. Even though we are in the middle of a massive selloff, there are still very profitable trades along the way. Two-weeks ago I warned readers prices would to tumble under $8k, but also said this was a dip-buying opportunity and prices would rebound back to $10k. And that is exactly what happened. There is no magic to this. The same things keep happening over and over again and it is simply a matter of paying attention.

And just like the equity market, the easy gains are already behind us and buying here is a much riskier proposition. We could coast up to $12k over the next few days, but the risk of a sharp selloff is never far away. Without a doubt this is little more than a bounce on our way lower. We the real bottom is still months away and under $4k. But until then, look for more profitable swing-trades. And most importantly don’t forget it is far easier to sell Bitcoin on the way up. Hold too long and these nice profits will evaporate.


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Feb 13

Is it too late to buy the dip?

By Jani Ziedins | End of Day Analysis

End of Day Analysis:

On Tuesday the S&P500 opened with a 0.5% loss. That would have been shocking a few weeks ago, but on the heels of last week’s volatility, it seemed fairly benign in comparison. And as such, most traders didn’t overreact and buying quickly lifted us off those early lows. By the close, we even managed to finish in the green.

There were no market moving headlines, but sentiment is the primary force driving this market and at the moment, fearful selling is taking a break. We reached a near-term capitulation bottom last Friday and have recovered decisively from those oversold levels. While this is obvious to everyone after the fact, last Thursday I told readers, I think the market look pretty good. Risk is a function of height and this is the least risky point in several months. Traders should be embracing these discounts, not running from them.” (Sign up for Free Email Alerts so you don’t miss my next call.)

Finding a near-term bottom is alleviating some of the anxiety that crept in last week, but without a doubt January’s complacency is long gone. Given the level of damage, we shouldn’t expect this market to rally back to the highs anytime soon. Instead, expect volatility to persist for a while longer as we carve out a long overdue base.

The worst is most likely behind us and it would take a new headline to push us under Friday’s lows. Since rising rates and inflation launched this selloff, those are the headlines we are most vulnerable to. That said, expect any follow-on selling to be less dramatic than last week’s selloff. These things lose strength as they drag on and get priced in. As such, the size of of swings in both directions will decrease over time.

This is a swing-trader’s paradise and that means buying weakness and selling strength. We came a long way from Friday’s lows, making this is a better place to be locking-in profits than adding new money. On the other side, long-term investors should stick with their favorite positions and even add to them. This weakness is a buying opportunity, not the start of something larger.

Bitcoin stabilized above $8k as expected. Dipping under $6k was a capitulation point and these higher prices are bringing a wave of relief for owners. This stability is supportive of prices over the near-term and we should continue creeping higher, even flirting with $10k. But don’t get too excited, this is just another bounce on our way lower. Every bounce is a selling opportunity and this won’t end until we fall under $4k. But it will take a while for us to get there. In the meantime we can profit from these bounces higher.


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