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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 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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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 started Wednesday’s session -0.5% in the red as the index continues struggling for a direction under 4,200 resistance.
For all the naysayers attacking this “overbought” market, Wednesday morning’s weakness failed to trigger a wider wave of selling and it only took a few hours before prices bounced back to breakeven.
While the index finished flat for the day, that’s actually a resilient performance for stocks. If this market were as fragile and vulnerable as the critics claim, the selling would have accelerated, not stalled and bounced.
Lucky for readers, we recognized the market’s indecisiveness a while ago and used that insight to our advantage. As I wrote last week:
The lack of a breakout or a breakdown is frustrating the people who are trading in anticipation of these things. As I’ve been saying for a while, this is a range-bound market and that means lots and lots of reversals. If a person has profits and they are not collecting them, those profits will be gone in days, if not hours. Savvy traders know this is the environment to stay nimble and take profits early and often.
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Novice traders love to claim the market is rigged when it doesn’t do what they want. The thing I never understand about this argument is if these traders know the market is rigged, why don’t they use that insight to follow the rigging and print money???
Don’t fall for lame excuses. If you lose money, it means your trading thesis is wrong, plain and simple. Rather than accuse banks or the Fed of cheating, recognize your mistake and change your approach. That’s the only way to survive the market over the long haul.
As for what comes next, last week I was wary of a near-term step back following March’s big run. But holding near the highs for a few weeks suggests these levels are real. As I often remind readers, a market that refuses to go down will eventually go up.
As high as stocks seem, it wouldn’t surprise me to see the index break through 4,200 over the next few days or weeks. I don’t expect a big breakout, but poking our heads above this key resistance level seems all but inevitable. If we were going to crash, it would have happened by now.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 poked its head above multi-month highs moments after Friday’s open, but those early gains were as good as it got and the index skidded into the red minutes later.
That said, Friday’s -0.2% loss was fairly trivial and hardly describes panic selling, especially considering the index was down nearly -1% in midday trade.
March’s rebound is running out of momentum near 4,200 resistance. But this shouldn’t surprise readers of this blog because I’ve been saying stocks have been rangebound for months. As I wrote Thursday evening:
While [Thursday’s] short squeeze produces quick profits for those of us lucky enough to be positioned on the right side of the reversal, the downside of short squeezes is they don’t have much staying power. As nice as riding Thursday’s wave higher was, savvy traders are standing next to the exits if they are not already locking in worthwhile profits.
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Well, it didn’t take long for the air to start coming out of Thursday’s short squeeze. One day’s up becomes the next day’s down. If a person isn’t taking profits when they have them, they will be sitting on losses a few hours later.
Savvy traders adopted an anti-bear and anti-bull outlook toward this market. March’s dip to the lower end of the 3,800 trading range wasn’t a prelude to a huge crash to multi-year lows, it was a buying opportunity to ride the next wave higher. And this rally to the upper end of the trading range doesn’t foretell of huge gains for as far as the eye can see. Instead, we are running out of buyers and on the verge of slipping back into the heart of the trading range.
A breakout is coming, but we need buyers to start feeling more greedy than fearful at these heights. It will happen, just not right now. Until then, keep taking profits early and often because if we don’t, the market will snatch all of those profits back.
At this point, look out for further cooling next week and ambitious traders can short that weakness. For everyone else, wait for the next bounce. Don’t worry, it will come along much quicker than most people expect.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 surged 1.3% Thursday after we got a few more pieces of data showing inflation continues falling.
Sure, inflation’s retreat is slower than most hoped for or even expected, but most sensible people agree we avoided the worst-case scenario the pessimists were predicting last year. Less bad-than-feared has been the name of the game this year as stocks continue trading near recent highs.
If we look at the headlines that allegedly triggered Thursday’s surge, they are fairly benign. That means it wasn’t the headlines driving this one-way buying frenzy, but traders reacting to the price action. More specifically, overly ambitious bears getting blown out of their short positions.
Lucky for readers of this blog, Thursday’s reversal didn’t catch us off guard. As I wrote Wednesday evening:
The lack of a breakout or a breakdown is frustrating the people who are trading in anticipation of these things. As I’ve been saying for a while, this is a range-bound market and that means lots and lots of reversals. If a person has profits and they are not collecting them, those profits will be gone in days, if not hours.
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While a short squeeze produces quick profits for those of us lucky enough to be positioned on the right side of the reversal, the downside of short squeezes is they don’t have much staying power.
As nice as riding Thursday’s wave higher was, savvy traders are standing next to the exits if they are not already locking in worthwhile profits.
As I’ve been telling readers for months, this is a back-and-forth market, not a directional one. While the headlines are less-bad-than-feared, that’s a long way from being good enough to send stocks back to record highs. Until something changes, expect stocks to continue trading sideways inside the 3,800-4,200 trading range.
No doubt it is hard to pull the plug on a trade that’s working as well as buying Thursday’s rebound, but it is far more painful to watch a winning trade turn into a loser because we got greedy and held too long. Just ask greedy bears that watched all of Wednesday’s short profits vanish into thin air.
And you know what? If we end up collecting profits too early because Thursday really was the start of the next big run to record highs, nothing prevents us from buying back in on Friday or next week.
Until proven otherwise, I will continue taking profits early and often because up to this point, the reversals have never been far away. If we’re not taking profits, then we will get stuck taking losses a day or two later.
This pattern will change at and we will eventtually get a bigger directional move, but this is not that point.
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What’s a good trade worth to you?
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For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished Wednesday down 0.4% after the monthly inflation report dipped to 5%, the lowest reading in nearly two years.
Stocks reflexively rallied on the news of falling inflation. However, the midday strength evaporated when the Fed’s latest meeting minutes revealed they were still contemplating another rate hike at their next meeting.
The good and bad cancel each other out and the market finds itself stuck in the middle of its latest consolidation near 4,100 resistance.
At this point, it would be hard for either bulls or bears to claim recent price action supports their arguments. The March rebound has clearly stalled near 4,100 resistance as prospective buyers grow leery of these elevated prices. But at the same time, bears’ widely predicted collapse from “too high” is nowhere to be found.
At this point, it feels like the market is settling into “just right” as it waits for the next meaningful data point. Stock prices would have reacted far more aggressively if either of Wednesday’s headlines were a surprise. Instead, the market expected inflation to cool modestly and for the Fed to contemplate another rate hike.
The lack of a breakout or a breakdown is frustrating the people who are trading in anticipation of these things. As I’ve been saying for a while, this is a range-bound market and that means lots and lots of reversals. If a person has profits and they are not collecting them, those profits will be gone in days, if not hours.
Savvy traders know this is the environment to stay nimble and take profits early and often. The next big directional trade is coming, but this isn’t it. If you are not taking profits when you have them, you will end up with a pile of losses.
Sign up for my FREE email alerts so you don’t miss the market’s next big move
If you find these posts useful, help me out by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
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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