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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:
Thursday’s session took the S&P 500 on another wild ride as steep opening losses bounced off of those early lows. While the index finished down -0.2%, that was actually a fairly robust ending to a day that traded as low as -0.7%.
As I’ve been saying for a while, this is a choppy sideways market and it is handing these whipsaws out in spades. One day’s up becomes the next day’s down.
But if we zoom the chart out and look at the daily and weekly patterns, the market is actually trading well with multiple bounces off of 4,050 support.
There have been more than enough excuses for this market to break down, yet every time the bears try, stocks bounce back in their face. A market that refuses to go down will eventually go up.
It is a worrying sign if the market is refusing to rally on good news, but the sentiment is overwhelmingly bearish as trader chatter continues to obsess over inflation, interest rates, tight employment, bank failures, and a looming recession.
There is a popular saying in the market that stocks climb a wall of worry, and the indexes trading near multi-year highs is a classic example of that.
For all the excuses the market has to go down, it keeps going up. Rather than argue with the market, follow its lead.
Until something changes, keep buying the bounces. At this point, it is only a matter of time before we are testing 4,200 resistance and even poking our heads above this key level.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished Wednesday’s session 0.4% higher after inflation fell to 4.9% and this key metric is now at the lowest level in two years.
While the above statement makes it seem like Wednesday was a perfectly reasonable session, lift the hood and you see it was anything but. An 0.8% opening gain disintegrated into a 0.5% loss before bouncing nearly 1% to finish up 0.4%.
Curbing inflation is critical for the Fed and the economy, so obviously a lot of investors were paying attention. The result fell in the middle of the road, not too hot and not too cool, but that didn’t stop impulsive traders from overreacting to it.
But this impulsive behavior isn’t new. This is a volatile market and traders have been overreacting to headlines and price action for a long time.
For as wild as the ride was, Wednesday’s late rebound confirms this market is still on solid ground and that 4,200 is still the target. But as is usually the case, getting there is anything but a smooth ride.
As someone positioned for the bounce up to 4,200, the midday tumble was disappointing and it even convinced me to lock in some of Friday’s profits proactively. But just because I sell a position doesn’t mean I’m giving up on it. As easy as it is to buy back in, we should never be afraid of getting defensive when something doesn’t feel right.
While we can’t jump every time we see our shadow, there are instances like Wednesday when the market does something unexpected. As much as I liked Friday’s rebound, I’m not willing to ride this position back into the dirt and I always have a backup plan in case things go wrong.
But just as important as getting out is being willing to get back in after we recognize the weakness was a false alarm. Sometimes we get lucky and the false alarm moves far enough that we can buy back in at even lower prices. Other times, like Wednesday, the whipsaw is so compressed that we are lucky to get back in near where we got out.
It is a hassle to sell and then buy back a few hours later, it sure beats allowing a profitable position to turn into a loser.
Wednesday was a wild session, but the refusal to break down means the near-term trend is still higher.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 slipped half a percent Tuesday as it continues digesting Friday’s big gains.
While it is more fun to watch the index stack big back-to-back gains, trading is rarely that easy. But as long as the gains are bigger than the losses, the bulls are still in control.
The two near-term points to watch are Monday’s highs and Friday’s lows. Break through either of these and prices will keep going in that direction. On the upside, 4,200 is easily within reach. On the downside, 4k and the 200dma loom large.
Which will it be? The answer you get largely depends on the speaker’s bias. But for those of us without a bias, the market is trading well right now and that can’t be ignored. Prices bounced twice off of 4,050. If this market was as fragile and vulnerable as the critics claim, the selling would have accelerated, not dried up and bounced.
Minor red days like Tuesday are a normal and healthy part of every move higher. Two steps forward, one step back. Until proven otherwise, we continue giving this market the benefit of the doubt.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished Monday’s session up 0.1%. While it is hard to get excited about such small gains, boring markets are bullish, especially ones following moves as big as Friday’s 1.9% rebound.
Stocks retreat from overbought levels quickly, so the longer we hold Friday’s gains, the more real they become.
This remains a choppy market, and we should expect lots of back-and-forth, but at the same time, something that refuses to go down will eventually go up. The fact we keep holding near 4,200 resistance means we will eventually hit and even exceed this widely followed level soon.
From Friday evening’s free post:
Friday gave us the bounce we’ve been waiting for, and there isn’t much to do other than keep holding, adding more, and lifting our stops. We will be locking in profits soon, but we still have upside left, and it is worth holding a little longer.
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Monday’s price action didn’t change anything. Keep holding Friday’s rebound and make sure our stops are at least as high as our entry points, making this a low-risk trade.
Slow is boring, but I don’t mind boring when it is profitable.
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By Jani Ziedins | End of Day Analysis
The S&P 500 finished Friday sharply higher as Thursday’s second thoughts are ancient history. The index closed up 1.8% following strong earnings from AAPL and a robust monthly employment report.
The cynics claim strong employment is bad for stocks, but the market no longer falls for the “good is bad” argument, and the index reclaimed the previous two days of selling.
As I’ve been saying for months, this is a choppy market and that means big reversals. Rather than jump on the bull/bear bandwagon every time the market approaches one end of the trading range, smart money is getting ready for the reversal.
And this is exactly what I told readers in Thursday evening’s post titled, “Why smart money is getting ready to buy the next bounce”:
[N]ow that the index slipped back near the April lows and the 50dma, we find ourselves on the other side of this pendulum. Rather than aggressively short this weakness, we should be getting ready for the next bounce. For shorts, that means locking in worthwhile profits. For everyone else, that means getting ready to buy the next bounce.
As I said earlier in the week, 4,200 is still very much in play and nothing has changed, the market is simply taking the long road to get there.
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Markets trade sideways 60% of the time, and this is one of those times. I still expect the index to challenge 4,200 over the next couple of weeks, but even that will only amount to a poke above this key level before slipping back into the trading range.
And I fully expect the sideways grind to continue as we transition into the slower summer months. If this market was going to break out or break down, it would have happened. The best play here is trading these small swings, taking profits, and then getting ready to go in the other direction.
Friday gave us the bounce we’ve been waiting for, and there isn’t much to do other than keep holding, adding more, and lifting our stops. We will be looking to lock in profits soon, but we still have upside left, and it is worth holding a little longer.
That said, our stops need to be at or above our entry points. There are zero excuses to allow a winning trade to turn red on us. As easy as it is to buy back in, pull the plug at our stops and then get ready to buy back in, which could be as soon as a few hours later. But as long as the keeps going up, we keep holding and lifting our stops.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 slipped another 0.7% Thursday as traders continue digesting Wednesday’s Fed rate hike.
The Fed did what it said it was going to do and the market’s response has been cool but measured. Prices slipped as some of the most optimistic investors were disappointed the Fed didn’t hint at rate cuts later this year, but in a volatile world where 1%, 2%, and 3% daily swings are not uncommon, -1.4% over two sessions is hardly panic material.
Stocks go up and stocks go down, that’s what they do. Monday evening, I warned readers to start locking in worthwhile profits:
Now is the time to start protecting last week’s profits by lifting stops and even taking some partial profits proactively…The price action looks good, and 4,200 is still very much on the table, but this is the wrong time to be getting greedy and cocky. Anyone doubling down up here is exposing themselves to a very routine step back on our way higher.
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I had no idea the market would shed 100 points over the next three sessions, but that’s how these things go. Always has and always will. Last week was a nice bit of up and we’ve given back all of those profits this week. Easy come, easy go.
I can’t repeat this often enough, this is a choppy market and that means one day’s profits will become the next day’s losses. If we’re not taking worthwhile profits when we have them, we’re not going to have any profits left to take a few days later.
But now that the index slipped back near the April lows and the 50dma, we find ourselves on the other side of this pendulum. Rather than aggressively short this weakness, we should be getting ready for the next bounce. For shorts, that means locking in worthwhile profits. For everyone else, that means getting ready to buy the next bounce.
As I said earlier in the week, 4,200 is still very much in play and nothing has changed, the market is simply taking the long road to getting there.
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What’s a good trade worth to you?
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Follow Jani on Twitter @crackedmarket
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