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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 slipped 0.7% Wednesday after the Fed raised interest rates 0.25% and suggested future rate hikes might not be needed.
The market initially rallied on the news, but Powell went out of his way to remind investors a decision to pause has not been made and further hikes are still possible. And the biggest let-down is the Fed didn’t give any hints that rate cuts are possible by the end of the year.
As expected, we got some good and some not-so-good. In the end, the market’s modest 0.7% giveback still leaves the index well within the recent trading range just under 4,200 resistance.
Fortunately, readers were ready for Wednesday’s modest reaction because it ended up exactly how I described it in Tuesday evening’s post:
[T]he Fed is not going to surprise us and we will get exactly what most people are expecting. That won’t stop impulsive traders from mashing the buy/sell button in the minutes after the announcement, but after a flurry of impulsive trading, the market will settle down and go back to what it was doing previously, which is consolidating recent gains under 4,200 resistance…
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Corporate earnings have been good enough, first-quarter inflation was moving in the right direction, and the Fed didn’t crash the party. This continues to be a “less bad than feared” rebound and the lack of “worse” is allowing stocks to hold near 52-week highs. Not bad, all things considered.
We get the monthly employment report on Friday, and all indications are it will be more of the same. If something was going to break this market, it would have happened by now. This week’s Fed meeting didn’t change anything, and despite Wednesday’s modest givebacks, 4,200 is still the near-term target.
Keep buying bounces and collecting worthwhile profits when we have them. Volatility remains elevated, but as long as we keep getting more up than down, smart money is betting on this market, not against it.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 took a step back Tuesday, shedding -1.2% ahead of Wednesday’s Fed meeting and rate decision.
Two steps forward, one step back. Nothing unusual or surprising about this price action. As I wrote Monday:
Now is the time to start protecting last week’s profits by lifting stops and even taking some partial profits proactively. We don’t need to harvest a lot, but it is amazing how refreshing it feels to lock in some profits and put our minds at ease. A little security is all we need to ride through the inevitable chop as we continue challenging 4,200 resistance over the next few days and weeks.
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With a nice pile of profits locked in Tuesday morning, we were eagerly looking for the next buying opportunity. And as luck would have it, we didn’t need to wait long before the selling stalled and bounced in mid-morning trade.
As easy as it is to buy back in, there are zero reasons not to take worthwhile profits when we have them. And in many instances, we get back in at lower prices, like we did Tuesday afternoon. (Start small, get in early, keep a nearby stop, and only add to a trade that is working.)
A big portion of Tuesday’s second thoughts was driven by fear of the Fed’s policy announcement Wednesday afternoon. While most people expect a 0.25% rate bump and pause after that, until the decision is locked in, there is some risk. And with the index bumping up against 4,200 resistance, traders were overcome by a bout of second-guessing.
As for Wednesday, the Fed is not going to surprise us and we will get exactly what most people are expecting. That won’t stop impulsive traders from mashing the buy/sell button in the minutes after the announcement, but after a flurry of impulsive trading, the market will settle down and go back to what it was doing previously, which is consolidating recent gains under 4,200 resistance ahead of a move to challenge and even break through this key level.
Nothing changed Tuesday and nothing will change Wednesday. Stick to the plan and that is buying bounces ahead of a move above 4,200 over the next week or two. And as always, this is a choppy market and that means locking in worthwhile profits when we have them. Buy the dip, sell the bounce, and repeat as many times as the market lets us.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 spent Monday dancing around breakeven as traders get used to these new highs. As is often the case, the big gains came early and fast, meaning anyone waiting for last week’s confirmation is left with little more than crumbs.
Luckily, readers of this blog were ready for Thursday’s big pop. As I wrote last week:
The market loves to convince us we are wrong moments before proving us right. As paradoxical as it seems, [last] Tuesday’s bloodbath could actually turn out to be very bullish if the market bounces over the next few days. That’s because this reflexive selling is purging the last of the dead weight and clearing the way for the next leg higher.
Well, wouldn’t you know it, last Tuesday’s bloodbath was, in fact, a false flag that cleared the way for these higher prices.
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As for what comes next, even though the market seemed stalled on Monday, it still has upside remaining, and I expect it to break above 4,200 over the next few days or weeks. Unfortunately, riding this echo won’t be anywhere near as easy, quick, or profitable as catching last week’s 120-point rebound across two sessions.
But that’s the way this goes. The early bird gets the worm, and in this case, that means making the hard trade when it feels certain to fail. Buy when we don’t want to buy and sell when we don’t want to sell…
Now is the time to start protecting last week’s profits by lifting stops and even taking some partial profits proactively. We don’t need to harvest a lot, but it is amazing how refreshing it feels to lock in some profits and put our minds at ease. A little security is all we need to ride through the inevitable chop as we continue challenging 4,200 resistance over the next few days and weeks.
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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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Traders hit the sell button Tuesday when an echo of last month’s bank crisis reverberated through the market and the S&P 500 tumbled -1.6%. And so continues the swinging pendulum of sentiment.
The thing about Tuesday’s banking headlines is these reports of massive outflows are old news. This isn’t what is happening now, but an autopsy of what occurred last month. If someone is freaking out over these headlines today, they are waaaaaaay late to the party.
We need new and unexpected headlines to break this market and as we learned last month, trouble at regional banks isn’t enough. If it was going to happen, it would have happened.
The market loves to convince us we are wrong moments before proving us right. As paradoxical as it seems, Tuesday’s bloodbath could actually turn out to be very bullish if the market bounces over the next few days. That’s because this reflexive selling is purging the last of the dead weight and clearing the way for the next leg higher.
The key is we need to bounce. Without that bounce, the selling could feed on itself for a few more days and go further. But without new and meaningful headlines to convert confident bulls into fearful bears, the selling will stall, and this dip won’t turn into anything more than a routine step back on our way higher. At this point, 4,200 resistance is still very much on the table.
While I remain optimistic, this wave of selling demonstrates why it is better to be a little late than a lot early. 4,200 is still very much in the cards, but there are zero reasons to commit early and hold a dip under 4,100. Savvy traders don’t buy dips, they buy bounces. This is a small but critical distinction.
As I wrote in Monday night’s free blog post:
While Bulls and bears love to place their bets ahead of time, I like waiting for the move to start first. A nice bounce Tuesday will be the green light to give this trade a shot.
As it turned out, Tuesday’s bounce never arrived and I was left watching the bloodbath from the sidelines. Which wasn’t a bad place to be. In fact, Tuesday’s selling works to my advantage because it lets me get in at even lower prices when the inevitable bounce finally arrives.
Maybe we bounce Wednesday. Maybe it doesn’t happen until Thursday, Friday, or even next week. But a bounce is coming because it always does. But until then, the lower we go now, the better it is for me.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 wavered between modest losses and small gains through Monday’s sessions.
While sideways is not as much fun as up, the fact most owners ignored every dip over the last few weeks tells us a lot about the market’s mood. If this market was going to crack, it would have happened by now. Instead, most owners shrug and keep holding.
It was wise to get cautious and lock in worthwhile profits a couple of weeks ago when we first got to these levels, as I wrote back on April 3rd:
Stocks move in waves; they always have and always will. After a nice run like that, rather than pat myself on the back for profiting from March’s reversal, I’m getting nervous that too much of a good thing can end poorly for anyone that holds too long.
Don’t get me wrong, I’m not calling this a top. Momentum is far more likely to continue than it is to reverse, but with 300 points of upside in our rearview mirror, this is the wrong time to be getting greedy. Savvy traders are taking worthwhile profits and getting ready for the next opportunity.
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But after the typical step-back failed to materialize, we have to start considering the next move will be “high getting even higher.”
As I’ve said countless times before, something that refuses to go down will eventually go up. At this point, this looks like up is only a matter of time. While it isn’t hard to figure out what the market is going to do next, the challenge is always getting the timing right. More often than not, the key isn’t what trade to make, but when to make it.
As I wrote last week, this sideways grind could start moving at any time and that means we need to be ready for it. While Bulls and bears love to place their bets ahead of time, I like waiting for the move to start first. A nice bounce Tuesday will be the green light to give this trade a shot.
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If you find these posts useful, help me out by liking and sharing them!
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What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
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