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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.
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 started the week off on the right foot, adding 0.6% Monday.
Headlines didn’t say much, and the lack of bad news allowed this market to continue trading within a few percent of 52-week highs.
Monday’s resilience won’t surprise readers. As I wrote last week:
[T]he index’s wedging price action lower can actually be bullish. After countless attempts, the best bears can do is knock a few points off of the market at a time. If there was real downside potential here, these five and ten-point violations would spiral into 50 and 100-point losses within hours. The fact so few owners are interested in selling each day’s successive new low suggests we are on the verge of running out of supply and bouncing.
As much as people want to hate this too-high, too-far, too-fast market, it continues holding up amazingly well. Elevated inflation, multi-decade high interest rates, deflation in China, a lingering regional banking crisis, and everything else the critics are throwing at this market, but none of it is sticking.
Quite simply, if this market was going to break down because of any of these well-known problems, it would have happened by now.
Say what you want about the market’s stubbornly optimistic mood, but nothing the critics say is changing it. Rather than fight the tide, smart money is along for the ride.
Without a doubt, the index slipped 150 points from recent highs. But that’s a good thing! A) Everyone knows the market moves in waves. And B) a little cooling off is good for the long-term sustainability of a bull market.
We can argue over whether 150 points and a couple of weeks is enough to reset a multi-month rally. But at this point, anyone claiming we are on the verge of the next big crash is simply not paying attention. If this market was going to crash on well-known headlines, it would have happened many months ago.
If the market is ignoring these things, smart money is ignoring them too. To do anything else means giving money away, and only stubborn fools do that.
Monday’s bounce was buyable with a stop near Friday’s lows. Start small, get in early, keep a nearby stop, and only add to a trade that’s working. If the selling resumes later this week, no big deal, pull the plug at our stops and try again next time. It really is that simple.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 spent most of Friday bouncing around just under breakeven before finishing the session -0.1% in the red.
While red is red, Friday’s price action wasn’t all that bad. The index opened at one-month lows Friday morning, but within a handful of minutes, those sellers disappeared and prices bounced off of those early lows, even spending a portion of the day in the green.
Most noteworthy is the initial push to fresh lows didn’t trigger a follow-on wave of selling. In fact, it was quite the opposite, with buyers taking advantage of those discounts as they pushed the index above those early lows.
As I’ve written previously, the index’s wedging price action lower can actually be bullish. After countless attempts, the best bears can do is knock a few points off of the market at a time. If there was real downside potential here, these five and ten-point violations would spiral into 50 and 100-point losses within hours.
The fact so few owners are interested in selling each day’s successive new low suggests we are on the verge of running out of supply and bouncing. Quite simply, if we were going to crash, it should have happened by now.
To be clear, few things shatter confidence like tumbling prices, so the longer we hold near the lows, the more vulnerable we are. But as long as each fresh low keeps being met with indifference, the market is actually setting up for a bounce despite all the red closes we’ve seen over the last two weeks.
As crazy as it sounds, I will be happy to buy a bounce off of 4,450 Friday
That’s is exactly what I did. Start small, get in early, and keep a nearby stop.
This trade might not work, but I liked the way it set up, and by starting small, getting in early, and keeping a nearby stop, my risk is low. If prices fall on Monday, it is no big deal. I take my lump and get ready for the next trade. But if it works, I add more and lift my stops.
It really is that simple.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished Thursday’s session essentially unchanged, but anyone who only saw that flat close would have no idea of the wild ride the market took us on.
Before the opening, we got the latest CPI data that showed inflation trucking along at a 3.2% rate in July. Not good, but also not bad. In fact, this initially appeared to be the Goldilox number many investors hoped for, and prices surged more than 60 points shortly after the open. So far, so good. Unfortunately, the market had other plans.
Rather than attract a follow-on wave of buying, big money started selling the early strength until it was all gone, and we finished the day right back where we started.
While we should resist the urge to get overly pessimistic following a session that closed flat, it is hard to find much good to say about Thursday’s price action.
This was the third time in recent weeks the market took a strong open and fumbled it into a disappointing close. Remember, how we close matters far more than how we start. And by that measure, it is hard to get excited about the market’s mood. We’ve passed up multiple opportunities to bounce back to the highs because the sellers keep taking over.
I’m not going to give up on this market just yet because trends are far more likely to continue than reverse, but we can only give it so many free passes before we have to take a far more critical look. 4,450 has been acting as support this week and the 50dma is quickly catching up. Stay above these key technical levels and smart money is still giving the uptrend the benefit of the doubt. But fall under these levels and all bets are off.
As crazy as it sounds, I will be happy to buy a bounce off of 4,450 Friday, but I will start small and keep a nearby stop because if the selling returns, it will get ugly and we shouldn’t expect 4,450 to save us again.
On the other hand, if a violation of 4,450 turns devolves into a waterfall selloff, that becomes a nice short entry with a stop just above Thursday’s close.
The market is at a tipping point and about to break strongly in one direction or the other. While bulls and bears are busy arguing over who is right, I’m waiting for the market to reveal its hand so I can jump aboard the next move. As long as I’m making money, it doesn’t matter to me who is right.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
It’s been a choppy few sessions as the S&P 500 takes a step back from 4,600 resistance.
Between a sluggish Chinese economy and renewed scrutiny of regional banks, overnight futures traders were not in a good mood Tuesday morning and the index skidded more than 1% in early trade. But as ominous as that open felt, most investors shrugged and didn’t sell. The initial wave of selling stalled 90 minutes after the open and the index bounced more than 30 points by the close. Even though the session ultimately closed down 0.4%, considering how the session started, it was a good day for bulls.
As I’ve written in previous posts, the domestic equity market hasn’t cared about China in years and the regional banking crisis is old news. If these events hadn’t taken us down previously, there is little reason to think Tuesday’s headline reruns would turn out any differently. While any headline can trigger momentary bouts of second-guessing near recent highs, we need something truly new and unexpected to flip the market’s stubbornly half-full mood.
At this point, this latest test of 4,500 support looks like nothing more than a vanilla step back following a big run higher. Without a doubt, the selling can resume, but given this afternoon’s nice bounce, it doesn’t look like this is the end of the uptrend.
For the nimble, Tuesday’s bounce was buyable with a stop under those early lows. If the bounce continues on Wednesday, add more and lift stops. If the selling returns, get out and wait for the next opportunity. This is an easy setup for those with the courage to take advantage of the market’s momentary second-guessing.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 slipped another quarter percent Thursday, adding to Wednesday’s US debt downgrade selloff.
But as far as selloffs go, Thursday’s decline was fairly benign. The index hit its lowest point early in the morning, and prices were comfortably above those initial levels for the remainder of the session, even getting into the green for a bit.
Lucky for readers, Thursday’s midday bounce wasn’t a surprise:
We traveled this road 12 years ago, the last time US debt was downgraded. That 2011 episode launched a meaningful, multi-month selloff in stocks. Are we in store for the same thing this time? No, probably not.
Novel events trigger fear and uncertainty because no one knows what is going to happen and with nothing to go on, people often fear the worst. But since we’ve already been down this downgrade path, there will be far less uncertainty this time.
Less uncertainty = less anxiety = less impulsive selling
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Runaway selloffs, well…runaway. They crash day after day and don’t look back. Thursday’s price-action was the opposite of runaway selling. The index opened low, and rather than rush for the exits, dip-buyers gobbled up the discounts and bid up prices.
The thing about panicked selloffs is we need panic. Thursday’s constructive trade took a load of pressure off of nervous owners. Another reassuring session like this on Friday and the 2023 US debt downgrade crash is already over.
Savvy traders recognized early Thursday that the next wave of selling wasn’t coming, and rather than argue with the market, they collected profits and got ready for the next trade.
Now, don’t get me wrong, we could definitely fall into another hole of impulsive selling on Friday, but at this point, the odds of that happening are not very good. If owners were going to panic, it should have happened on Thursday. Another flattish session on Friday and most owners will be breathing a sigh of relief since most investors are reluctant to sell their favorite stocks at a discount.
As for how to trade Friday, savvy traders are already in cash and ready to jump on the next trading opportunity. If the aggressive selling returns Friday morning, short that with a stop above Thursday’s close. On the other hand, if prices turn green on Friday, buy the bounce with a stop under Thursday’s lows.
As I wrote earlier in the week, I was positioned for this selloff, and it turned into a great trade with 3x leverage. But if the selloff is already showing signs of bouncing, it is time to collect profits and get ready for what comes next. I don’t care what happens as long as my trading plan keeps me on the right side of the market.
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