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.

Feb 03

Should we trust this bounce?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 was more flat than anything Wednesday. But by finishing 0.1% in the green, that was good enough for the third up-day this week, leaving the index 1% shy of all-time highs. Not bad given the fear and anxiety that washed over the market during last week’s 3% pullback.

Stocks go up and stocks go down. That’s what they do. Just because the index goes down, don’t automatically assume something is wrong. And the same applies to the subsequent bounce. Unfortunately, most investors cannot resist the impulse to overreact to every dip and bounce in the road.

Humans love trends and we turn every two dots into a line that extends forever into the future. But that’s not the way markets work. Most daily gyrations amount to nothing more than meaningless noise.

What we do know is every dip over the last several months bounced within days, if not hours. That trend is built on dozens of data points and actually means something. And you know what? That longer-term trend endured despite all of the fear and uncertainty that consumed the herd last week.

The most important development was last week’s selling stalled and bounced. That reconfirms most investors are still in this for the long-haul and remain reluctant to sell bearish headlines or negative price-action.

Right or wrong, when owners refuse to sell, stocks remain stubbornly resilient. While this cannot last forever, it will continue for at least a bit longer.

As long as we keep getting more up than down, everything is going according to plan. Don’t fight what is working.

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Feb 02

Why GME is down and the indexes are up

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Tuesday sharply higher as air continues coming out of Reddit’s GME, AMC, and SLV trades.

AMC tumbled 62% in just a few days. GME is down 82% from last week’s intraday highs. And even silver took it on the chin, falling 12% from yesterday’s early levels.

Easy come easy go. But everyone with even a rudimentary understanding of market mechanics knew this outcome was inevitable. It didn’t take a “Wall Street conspiracy” to kill this frenzied buying. Instead, these small millennial buyers simply ran out of cash and there was no greater fool left to buy a struggling retailer up nearly 10,000%.

The broad market is clearly relieved the old rules still apply. Every day GME rallied last week, the indexes fell. And this week, every day GME fell, the indexes rallied.  This is Reddit thin is quickly turning into nothing more than a flash in the pan. Rather than upend the entire market and send it into chaos, this is turning out to be little more than a novelty that is fading as quickly as it came.

That said, these ripples will be felt for a while. GME already bounce 100% off of this morning’s lows. Between another wave of gullible buyers rushing in to “buy the dip” and shorts closing positions with spectacular profits, there will be a good amount of buying in these names for a while and they will continue trading at elevated levels. (Far off the silly highs, but well above where they started.)

But from the index’s point of view, this was a minor sideshow and the bull market is ready to proceed after last week’s brief dip and reset.

Remember, bull markets bounce countless times, but they reverse only once. So far this looks like nothing more than another one of those momentary stepbacks on our way higher.

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Feb 01

Is the rally back on?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 bounced back Monday, recovering a respectable chunk of last week’s 3.3% tumble.

There were not any clear or obvious economic headlines driving last week’s selling and the same applied to today’s bounce. This was little more than a fleeting swing in sentiment as investors digested last week’s frenzied buying of a handful of beaten-down stocks.

Up to this point, investors have been ignoring any and all bad news and chances are good this latest wobble won’t turn out any different. But last week’s buying frenzy of a handful of garbage stocks gave mainstream investors pause. While they were previously okay with moderately stretched valuations in respectable names, they were not ready for the absurd silliness that was occurring in nearly bankrupt companies.

Most likely, this index pullback won’t end any differently than all of the other pullbacks that came before it. This dip went a little further than most of the others, but this bull market is far from broken. If prices continue firming up this week, last week’s dip will actually turn out to be a healthy development. Every sustained move higher needs a few step-backs along the way.

As for trading this chop, sometimes indexes bounce within hours. Other times the selling stretches across several days. When accounting for the market’s mood, it is hard to know exactly how much it will over or underreact to each situation. That is why our trading plan must account for all possibilities.

Sometimes markets are easy to trade and the indexes drift higher without ever seriously threatening our stops. Other times it shakes us out several times before making its next move.

I still believe this market is headed higher over the medium term, but it might squeeze me out at my stops one or two more times before it finally happens. Or maybe we shoot back to the highs without looking back. Either way, my trading plan is ready.

If this keeps going up, I buy. If the pullback resumes, I get out at my stops and prepare to buy the next bounce. It doesn’t get any more complicated than that.

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Jan 28

Why everyone will be right about GME, but still end up losing everything

By Jani Ziedins | Free CMU

Cracked.Market University: 

Everyone is talking about GME, but how can you not when we are witnessing something we will likely never see again in our lifetimes?

If GME at $40 seemed ridiculous, then $100 is absolutely bonkers. And I can’t even begin to think of a word that adequately describes the $483 it hit this morning.

If someone told me a stock would explode 2,463% in four short weeks, surely they just cured cancer, cracked the code for cold fusion, or invented an anti-gravity machine. Obviously, whatever they did, it would change life as we know it.

Yeah, no. GME is a pedestrian company that sells used video games on physical disks. And not only did this company not cure some great ailment, it probably won’t even survive long enough to see the 2024 Paris Olympics.

That probably explains why the stock collapsed 77% in two short hours this afternoon as it tumbled all the way back to $112.

The most fascinating thing about this week’s move from $65 -> $483 -> $112 -> $193 is EVERYONE was right!!! The bulls were right about this “going to the moon.” And bears were right that it would collapse in a gigantic fireball.

Between this week’s 640% surge and subsequent 77% collapse, everyone had the chance to be right. And most GME speculators were sitting on a huge mountain of profits. Some profits even reached seven figures!!!

But as good as this seemed for everyone involved, virtually all of these traders will ultimately lose money. And not just a little money. But they will likely lose all of their money on this trade. (And some will lose even more than that!)

The problem is when these people are sitting on a mountain of profits, rather than thank their lucky stars and lock-in these once-in-a-lifetime profits, they are too busy gloating and taunting the other side. Instead of being satisfied with nearly $500, bulls insist on waiting until this goes all the way to $1,000. And bears that captured a 77% tumble in 120-minutes, rather than jump on this historic move, they demanded it to go all the way to $5.

And you know what, both sides are equally guilty of holding too long and letting these historic profits evaporated before their very eyes. As the saying goes, “bulls make money, bears make money, and pigs get slaughtered.”

Don’t be a pig and take these spectacular profits when you have them. Because if you don’t, they will almost certainly be gone in a few hours.

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Jan 27

Is this finally time for bears to shine?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slumped 2.5% in the biggest one-day loss since the election. While everyone is waiting for the inevitable demise of these frenzied bubble stocks, they were some of Wednesday’s few winners with GME popping 135% and AMC adding a staggering 300%.

While experienced investors are growing concerned about bubble mania, clearly the fringe speculators driving these frothy stocks higher are not heeding the clear and obvious warnings.

As I wrote yesterday, bubbles take far longer to inflate and pop than most people realize. As crazy as things appear right now, most likely we still have a ways to go before this bull market is taken down by valuation worries. But just because higher prices are ahead for the indexes doesn’t’ mean we cannot take a few step backs along the way.

While I still believe higher index prices are ahead, that doesn’t mean I’m holding “no matter what”. As I wrote previously, I’ve been following this rally higher with stops in the mid to upper 3,700s and those stops got hit today. Regardless of what I believe, that’s my signal to get out and reevaluate. As easy as it is to buy back in, there is no reason to stubbornly hold a falling market.

Most likely this is just another false alarm on our way higher, but I’m not willing to bet my money on it. If prices bounce tomorrow, I’ll get back in. If they keep falling, even better, that means I’m entering at even lower prices.

I still like this market but that doesn’t mean I’m blindly following it. These are the times we follow our thoughtful trading plan, not shoot from the hip while overcome with anxiety and second-thoughts.

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Jan 26

Is this bubble about to burst?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 continues hovering near all-time highs. As I often say, something that refuses to go down will eventually go up. And that’s definitely the case here.

With the election behind us, Covid vaccinations finally starting to roll, and infection rates coming down from the post-holiday peak, investors need something new to worry about. And right now bubble talk is taking over the financial headlines with outrageous moves in names like GME, BB, TSLA, and Bitcoin.

I’m equally concerned by these obviously unsustainable moves and am certain they will end in tears for most of the retail investors piling into these trades. But I also know it takes a long, long time for bubbles to burst. The dot-com bubble started in 1995 with Netscape’s IPO and it didn’t burst until 2000. That was five years worth of inflating.

Without a doubt, we are already multiple years into this inflation and the burst is a lot closer than five years. But it is still more than six months out and it might not even happen until next year or the year after. Do we really want to pull the plug on a great rally two years early because a handful of stocks are obviously overvalued?

I don’t condone the buying frenzy going on in parts of the market and it will end poorly for those gullible chasers. But for the time being, there is nothing for index traders to do except keep following this bull market higher. When the time comes, there will be plenty of concrete signals in the indexes’ price action. Until then, stick with what is working.

If there is one thing we know for certain about bursting bubbles, they don’t make new highs.

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