All Posts by Jani Ziedins

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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.

May 15

Trading plans for what comes next:

By Jani Ziedins | End of Day Analysis

Free After-Hours Update:

On Tuesday the S&P500 experienced the first real giveback since the May rebound kicked off. Economic headliners were mixed, but that’s all it took to knock us from the highest levels in a couple of months.

Last Thursday I warned readers to be more careful now that we were approaching the upper end of the trading range. Risk is a function of height and this was the highest we’ve been since early March. Recent gains made this a better place to be taking profits than adding new positions. And Tuesday’s pullback to 2,700 support validated those warnings.

The question is what happens next? It was nice to see buyers show up once prices slipped to 2,700. Market crashes are brutally quick and while we are not in the clear yet, one day of support is constructive. If this market was grossly overbought, we would have tumbled far more dramatically from the highs. Tuesday was a more measured pullback and that tells us this market is not overly vulnerable.

Hold 2,700 for another day and everything is looking pretty good and the path of least resistance remains higher. But if we slip under 2,700 Wednesday, be prepared for a wave of technical selling to weight on the market. The way it responds to this violation of support tell us what comes next. If the selling intensifies, expect the weakness to carry us back into the heart of the trading range. That puts 2,650 and the 200dma in play. But if we dip under support, supply dries up quickly, and we reclaim 2,700 before the close, then things are looking strong and the May rebound continues.

At this point the odds are 50/50 if support holds or fails. For a good trade, we want better odds than that. The this opportunity doesn’t get real attractive unless we dip back to the 200dma and bounce. That’s where the discounts create a safer and more profitable trade. If prices don’t dip and we hold current levels for a few more days, that tells us the market wants to go higher. In that case 2,800 is in play and we need to be patient.

I don’t know what the market will do next, but I have several trading plans ready to go. It won’t be long before the market tells us what it wants to do next and those of us that are ready will be positioned to profit from it.

After holding $9k support for several weeks, Bitcoin finds itself under this widely watched support level. As I warned readers two weeks ago, there comes a point where support turns into stalling. That is what happened here. The inability to move beyond support made a violation inevitable. The latest rebound from the $6k lows helped rebuild sentiment, but expect most of those positive feelings to disappear if we stumble back into the $7k range. It often takes bubbles six to twelve months to find a bottom. If that happens here, that means lower-lows are still ahead of us. I’m skeptical of BTC at these levels and it needs to recover $9k as soon as possible to prove me wrong. Otherwise expect nervous selling to return and push us back under the $6k lows.

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Jani

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May 10

What to do now that we bounced

By Jani Ziedins | End of Day Analysis

Free After-Hours Update:

On Thursday the S&P500 extended last week’s rebound off 2,600 support and now finds itself well above the 50dma and 2,700 resistance. What a difference a few days makes. Last week traders were fleeing ahead of the expected collapse, this week those same traders are scrambling over each other to get back in.

Not a lot changed over the last week. The Fed is still planning on raising rates. Treasuries hover near 3%. Trump’s Trade War is still hanging over us. Last week these things were going to wreck our economy. This week no one remembers them. Are these things important? Should we ignore them? What is a trader supposed to do?

As I’ve been saying since early February, the big selloff was over but the drop in prices did enough damage that we wouldn’t rebound to the highs anytime soon. If we weren’t going any lower, but weren’t going higher either, what’s left? Sideways. And that’s exactly what’s happened since the February selloff bottomed. Rebounds fizzle and the breakdowns bounce. Bulls and bears trading these as larger directional moves have been getting humiliated by the reversals. But their loss is our gain and it has been highly profitable for those of us buying the weakness and selling the strength.

Now that we are at the upper end of the range, has anything changed? Nope. Rather than chase the relief higher, we should be growing more cautious looking for a place to take profits. Risk is a function of height.  Last week we were near the lows of the year. Rather than run from the market, we should have been buying those discounts. And now that prices are significantly higher, rather than rush in, we should be growing cautious as the risk/reward swung the other direction. Trading is not hard once we learn what to look for.

I’m most definitely not calling this a near-term top. It would be foolish to short this strength for no other reason than we reached the upper end of the latest trading range. But the risk/reward is no longer in our favor and that means moving to a defensive posture and taking profits. Only after cracks start forming should anyone even consider going short.

Nothing has changed from last week to this week. That means keep doing what has been working. Buy weakness and sell strength.

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Jani

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May 08

Why everyone should have seen this rebound coming:

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

On Tuesday S&P500 closed flat after spending most of the day in the red. Prices dipped in anticipation of Trump’s announcement to leave the Iranian accord and reimpose sanctions. This injects further uncertainty into the already unstable Middle East. Not knowing what is going to happen next is a big reason oil has rallied above $70.

But as much noise as the media made over Trump’s widely anticipated announcement, the market largely brushed it off. Prices dipped more than 0.5% as the knee-jerk reaction was to sell the announcement, but anyone who has been paying attention knew the market expected this and it wasn’t a big deal. After the headline sellers finished selling, prices rebounded and I doubt many people will give this a second thought on Wednesday.

Last week it felt like the market was on the verge of collapsing. We undercut the 200dma and 2,600 support, but instead of triggering a wave of selling, that was the capitulation bottom and prices have rebounded back to the upper end of the recent trading range.

The thing about markets like this is both bulls and bears are right. Wait a few days and the bull will be right when prices rebound. A few days after that the bear will be right when we stumble back to support. While both sides keep getting proven right, the painful irony is both sides are also bleeding money from poorly timing their trades.

Bulls buy the strength when it confirms their bullish bias. Unfortunately buying strength in a trading range is jumping in at the exact wrong time. Same goes for the bears who short weakness moments before prices rebound. The biggest challenge in the market isn’t knowing what is going to happen, but getting the timing right. Unfortunately most bulls and bears are getting crushed in this sideways market because they are making the right move at the wrong time.

Last Thursday I wrote the following in my free blog post, the same day the market scared the hell out of everyone by crashing through the 200dma and undercutting 2,600 support:

“As I’ve been saying since February, we are in a trading range. That means buying weakness and selling strength. Stick with what is working until something changes. Did something change today? Nope. That means today’s weakness was a buying opportunity, not a chance to bailout “before things get worse”. Maybe we slip a little further, but that’s not a big deal. Remember, risk is a function of height. The lower prices go, the less risky it is to buy. If this market wanted to crash, it would have happened months ago. There have been more than enough excuses to send prices tumbling. Instead, every time we slip to the lows, supply dries up and prices rebound. This is a resilient market, not a weak one. And the only people losing money are the ones overreacting to these gyrations.”

Read the full post if you want to learn how I came to that conclusion, but less than 24-hours later the market exploded higher. As I said before, predicting the market isn’t hard, the trick is getting the timing right. And often it takes more than good timing too. Many times the market tests our conviction and convinces us to abandon our well thought out trades moments before proving us right. I don’t mind losing money on a bad trade because that is the cost of doing business. But there are few things more frustrating than losing money on a winning trade. I wish there was an easy answer for this, but recognizing the difference between conviction (right) and stubbornness (wrong) is the art of trading and only comes from experience.

But that was last week’s trade. What most people want to know is what is coming next. Even though the market is approaching the upper end of the latest trading range, I actually think there is a little more upside left in this rebound. The market likes symmetry and last Thursday’s dip under support was fairly dramatic. We should expect the rebound to be similar and it doesn’t feel like we are at dramatic levels yet.

The resilience of this rebound was confirmed by Tuesday’s strength in the face of Trump’s headlines. The midday selloff could have easily spiraled out of control and sent us tumbling back to support if this market was weak. Instead of accelerating lower, supply dried up and we rebounded. Prices tumble from overbought levels easily and quickly. Resisting the temptation to selloff Tuesday afternoon tells us the market is solid, not fragile. At the very least I expect a retest April’s highs. That said, even though the near-term path of least resistance is still higher, this is a better place to be taking profits than adding new money. In trading ranges we buy weakness, not strength. Those with profits should start looking for an opportunity to lock them in.

Long gone is talk of a Tech Meltdown. Weeks ago I told readers people would be kicking themselves for not buying those discounts and it didn’t take long for those discounts to evaporate. For months people were begging for a dip in their favorite stocks. Yet when the dip finally happened, most people were too scared to buy. Of course if this were easy, everyone would be rich. The thing to remember is most people lose money in the stock market, so that means doing the opposite of most people. If most people are selling great stocks, that means we should be buying them.

There is a lot less near-term upside left in most FAANG stocks because they have returned to their highs. but this trade is still alive and kicking and that means sticking with it over the medium term.

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Jani

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May 03

Is this dip different?

By Jani Ziedins | End of Day Analysis

Free After-Hours Update:

Thursday the S&P500 finished down a modest 0.2%, but how it got there was anything but a smooth ride. Stocks gapped 0.5% lower at the open and it only got worse from there. At the height of the selling, we shed 1.5% and undercut the 200dma and 2,600 support. But just when things were the most hopeless, supply dried up, prices rebounded, and we even briefly poked our head into the green. Anyone just looking at the closing price would have no idea what happened today. But maybe that isn’t a bad thing given all the people that made poor trading decisions reactively selling the midday weakness. This is one of those times when ignorance really was bliss.

The selling actually started Wednesday shortly after the Fed announced their latest policy decision. Even though they kept interest rates steady, they confirmed their plans to continue raising rates later this year. That was followed by revelations Trump’s money was used to coverup his alleged affair with a porn star. Combined those headlines set off a selling spree that didn’t end until we shed 60-points and violated the support.

Even though they fueled a dramatic ride, the headlines driving this selloff were suspicious at best. The Fed did exactly what they said they would do, and everyone expected them to do. No surprises and it is simply a continuation of previously stated policy. Policy that hasn’t moved the stock market in a meaningful way over the last five years. Even 2013’s “Taper Tantrum” was a flash in the pan and erased within a couple of months. Would today’s policy statement turn out any differently? No, of course not. But that didn’t stop people from overreacting and reflexively rushing for the exits.

The same goes for Trump’s brewing sex scandal. Maybe its “fake news”, maybe “where there is smoke, there is fire”. Either way it doesn’t really matter to the market. The stock market rallied after Trump’s election on expectations of regulatory relaxation and tax cuts. He delivered both of those promises last year and the market got everything it wanted. If the Trump administration goes down the toilet, it will be a political scandal, not an economic problem. For confirmation of this thesis, all we have to do is look at Clinton’s impeachment in the late 90’s. While it dominated headlines and monopolized Congress, the economy and stock market chugged along, totally oblivious to what was going on in D.C. In fact Congress getting bogged down by a political scandal is actually a good thing because that keeps those fools from screwing up anything more important. The less Congress does, the better it is for the economy and the stock market.

And while a lot of traders were scrambling for the exits today “before things get worse”, there really wasn’t any meat to the headlines and is why the selling stalled so quickly. This is only the latest in the long list of headlines that failed to break this market. Why where these headlines any more significant than the last time the Fed bumped interest rates? Or Muller raided Trump’s lawyer’s office? Or the escalating Trade War with our allies and China? These headlines didn’t matter any more than the others and is why prices bounced.

Days like today challenge our resolve. Without a doubt the selling felt real. But the thing to remember is by rule, every dip feels real. If it didn’t, no one would sell and we wouldn’t dip. Given the huge directional moves over just a few minutes, I actually suspect computer algorithms are driving a lot of this volatility. These computer programs look at all the same data and make the same trading decisions at the same time. That herd behavior triggers these cascading selloffs and explosives surges higher. But the thing to remember is algorithmic traders only represents a small fraction of the total money in the stock market. Once all of these small trading firms go “all in”, or “all out”, the buying/selling stalls and prices reverse to more normal levels.

The only way to survive periods like this is to have conviction in your positions. Or to simply ignore the market. Anyone who checked their stocks at 5 o’clock tonight totally missed the temptation to sell at a much lower levels. That’s the problem with watching the market too closely when you don’t have enough conviction in your trading ideas, the market’s volatility chews you up and spits you out.

As I’ve been saying since February, we are in a trading range. That means buying weakness and selling strength. Stick with what is working until something changes. Did something change today? Nope. That means today’s weakness was a buying opportunity, not a chance to bailout “before things get worse”. Maybe we slip a little further, but that’s not a big deal. Remember, risk is a function of height. The lower prices go, the less risky it is to buy. If this market wanted to crash, it would have happened months ago. There have been more than enough excuses to send prices tumbling. Instead, every time we slip to the lows, supply dries up and prices rebound. This is a resilient market, not a weak one. And the only people losing money are the ones overreacting to these gyrations. They lose money buying when they are feel confident (high) and sell when they are fearful (low). If we want to make money, do the opposite of most people. That means buying fear and selling confidence.

If you found this post useful, return the favor by sharing it on Twitter, Reddit, and Facebook!

Jani

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May 01

How I knew the Trade War selloff would bounce

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Tuesday morning the S&P500 tumbled at the open, extending Monday’s selloff. Trump’s trade war returned to the headlines as proposed tariffs were set to start May 1st. In the closing hours of April 30th, the Trump administration relented and further postponed the start of tariffs for our allies to allow for more negotiations. Unfortunately those concessions didn’t calm the market’s nerves and we tumbled back near 2,600 support in midday trade. But just when things looked their most hopeless, the market found a bottom and rebounded into the green by the close. What happened???

Loyal readers of this blog know we don’t get worked up over recycled headlines. That’s because most owners who feared those headlines sold them the first time it came out and those sellers were quickly replaced by confident dip buyers willing to rush in and hold those risks. That turnover in ownership is what “prices in” the news. Once all the people who are afraid of a headline bailout, there is no one left to sell the next reoccurrence of those headlines. When no one sells the news, it stops mattering. And that is what happened here.

A couple of months ago Trump’s trade war sent a chill through the markets. But now it is more of a shiver. And soon it will barely raise goose bumps. Those of us that recognize this pricing-in phenomena profit from these dips. Were these headlines new and unexpected? No. Where they more of the same? Yes. That told us to expect a smaller dip than last time and gives us a good gauge of when to buy the dip. We’ve been living with these headlines for a while, so that meant the dip won’t go very far and we could jump in early. And that is exactly what I did. I hope some of you were able to do the same.

The opposite is true when confronted with new, unexpected, and especially dire headlines. During periods like that, we stay away from the market for several days because it takes time for the market to come to terms with its new reality. But that wasn’t the case today and why prices rebounded so quickly.

As I’ve been saying since February’s plunge, we transitioned into a trading range and the market was going to consolidate last year’s gains. In theory trading ranges should be really easy to trade, all we have to do is buy when we get to the lower end and sell when we get to the upper end. It is actually that easy if that is what we did what we were supposed to do. Unfortunately most people get caught up in their bullish or bearish bias and that prevents them from seeing each of these range bound moves for what they are, an unsustainable move to the boundary of the range that will soon fizzle and reverse.

Instead of confidently buying the dip and selling the rally, most traders convince themselves that each mover lower is the start of the next crash and the following rebound is the start of the next breakout. People get way too emotional as we approach the edges of the trading range and overreact to what is really just a normal gyration. Buying weakness and selling strength can be really profitable for those of us that do it right. Unfortunately the crowd is constantly giving away money buying strength (high) and selling weakness (low). If most people lose money in the market, shouldn’t we be doing the exact opposite?

Keep doing what has been working. Right now that is buying weakness and selling strength.

If you found this post useful, return the favor by sharing it on Twitter, Reddit, and Facebook!

Jani

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Apr 26

Why we should have seen this bounce coming

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

On Thursday the S&P500 surged higher, extending Wednesday’s bounce off of 2,600 support and the 200dma. Markets sold-off Tuesday on fears of 3% Treasuries, but that nervousness and uncertainty evaporated as the focus returned to earnings. So far Facebook and Amazon knocked the ball out of the park and that strength is putting investors at ease.

While anyone can explain what happened after the fact (hindsight bias), it wasn’t hard to see this bounce coming a few days ago. This is what I told readers in Tuesday’s free blog posts:

“The thing to remember about today’s 3% headline is bond prices have been rising since Trump’s election. For practical purposes, 3% is no more significant than 2.9% or 3.1%. The round number simply makes for a better headline. Will 3% change anything, probably not. If the market didn’t care about 2.5%, 2.7%, or 2.9%, then 3% won’t matter either. This market has been incredibly resilient because confident owners refused to sell every bearish headline thrown at it over the last three months. Will this time be different? Not likely.”

Predicting the market isn’t hard if you know what to look for because the same thing keeps happening over and over. But just because we know what is going to happen doesn’t make trading easy. Far and away the hardest part is getting the timing right. That is where experience and confidence comes in. Several months ago investors were begging for a pullback so they could jump aboard this raging bull market. But now that prices dipped, rather than embrace the discounts, these same people are running scared. Markets dip and bounce all the time, but we only make money if we time our trades well.

The most important thing to remember is risk is a function of height. The higher we are, the greater the risks. By that measure, Tuesday’s dip near the 2018 lows was actually one of the safest times to buy stocks this year. Did it feel that way? Of course not. But that is why most people lose money in the stock market. If most people were selling Tuesday, and most people lose money, then shouldn’t we have been buying? Given the market’s reaction today, the answer is a pretty resounding yes.

The point of this post isn’t to brag about the calls I made, but letting people know it is possible to read the market and make money from these swings if they learn to look at the right things and ignore all the other noise around them.

And this doesn’t just apply to this week’s move. In January I warned readers the relentless climb higher was unsustainable and incredibly risky. Just when the crowd was feeling the most confident, February turned into a bloodbath. But what most people failed to realize is that dip was actually the safest time to be buyings stocks because prices were dramatically lower. It is always safer to buy when fear and uncertainty are peaking than when everyone is calm and confident. This year, far and away the riskiest time to own stocks was in January when everyone was confident and the safest was to buy when everyone was scared in February.

Then we come to what happened since. I told readers the selloff did enough damage that we shouldn’t expect a rebound back to the highs. Instead, look for a sideways consolidation and a trading range to develop. In a trading range we buy weakness and sell strength because every directional move fizzles and reverses. And what has happened since February? Every directional move fizzled and reversed.

While it is easy to identify a trading range when looking at an old chart, these things also easy to spot in real-time. Unfortunately most people miss it because their judgement is clouded with bullish or bearish biases. They assume every move the higher or lower is the start of the next big move. But just when everyone is convinced the rally is back on, or the selloff is about to get worse, the move fizzles and reverses.

I don’t have a crystal ball, but I have been doing this long enough to recognize these patters and profit from them as they happen. If you learn what to look for, you can do it too.

If you found this post useful, return the favor by sharing it on Twitter, Reddit, Facebook, and everywhere else traders gather.

Jani

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