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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 was as bipolar as it gets for the S&P 500.
In a very disappointing fashion, the index turned respectable opening gains into fresh multi-month lows by lunchtime. That’s not the price action you expect from a healthy market. But just when all hope was lost, or more specifically, because all hope was lost, supply dried up and prices bounced decisively into the close, finishing near the intraday highs.
As bad as the morning looked, the afternoon’s rebound was doubly impressive. Remember, it’s not how we start, but how we finish that matters most. What very easily could have triggered another big wave of selling reversed course in a beautiful capitulation bottom.
This was the trading signal we’ve been waiting for and hopefully you didn’t miss it.
As I’ve been writing for a while, I don’t believe this latest pullback from the highs is the start of something more insidious. Stocks go up and stocks go down, that’s what they do. And no one should be surprised when stocks pull back from multi-month highs and consolidate those gains. This is very normal and healthy behavior.
But no one claimed traders have to be rational. Give the market a few down days and all of a sudden everyone is predicting the next big crash. Sure, the market failed to bounce at 4,100 support and even undercut 4k, but that is par for the course for a market that rallied four hundred points in little more than a month. Two steps forward, one step back. Everyone knows that’s how this game works, yet they always forget that simple truth in the heat of battle.
I really liked Thursday afternoon’s bounce. This was the bounce I was looking for and I bought it with open arms. Without a doubt, the selling could return Friday, but my stops near Thursday’s midday lows will keep me safe. And if I get dumped out, that’s okay too. I move to the sidelines and wait for the next buying opportunity, something that could arrive as soon as Friday afternoon.
Everyone wants stocks to pull back so they can buy more, but every time the market gods answer their prayers, most of these people are too scared to buy. Don’t be the average trader. Have a trading plan and stick to it. The hardest trades to make often turn into our biggest winners.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Wednesday turned into another back-and-forth session for the S&P 500 as the market digested the minutes from the latest Fed meeting. The index spent most of the session bouncing between small gains and losses before ultimately closing down a fairly trivial 0.15%.
While the Fed’s meeting minutes were responsible for triggering a late wave of selling, the modest size of the givebacks isn’t all that noteworthy. Stock crashes are breathtakingly quick, so giving back a handful of points in the final hours of the session isn’t that big of a deal. This bear market has seen more than its fair share of shocking headlines that trigged gigantic waves of panic selling that sent stocks tumbling 3%. Wednesday’s 0.15% loss was about as far away from that as you can get.
While it is more fun to watch stocks climb higher, everyone knows down days are a normal and healthy part of every market. And more than that, this latest two hundred points retreat from recent highs has changed the risk/reward.
Hindsight being 202/20, it’s obvious now that 4,200 was too high and it was time for a cooling off. More useful would be knowing this back when stocks were challenging 4,200 resistance. Lucky for readers of this blog, that is exactly what I did on February 2nd when the market peaked at multi-month highs.
Bears are quickly becoming an endangered species, but as nimble and agnostic traders, we have to get concerned when one side accumulates too much power because it often ends in a reversal in the other direction. Now, to be clear, I’m not picking tops, but 700 points above the October lows and we have to be aware that a huge portion of the near-term upside has already been realized.
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And wouldn’t you know it, here we are a few weeks later and bulls are the ones that have become an endangered species. And so continues the swinging pendulum of sentiment. But just as it was unwise to be chasing the market when everyone was bullish back near multi-month highs, it is just as risky to be overly bearish near recent lows.
Stocks move up and down, that’s what they do. Opportunistic traders take advantage of these price swings. Foolish traders don’t learn from their mistakes and keep drawing never-ending trend lines on their charts.
Can stocks keep falling? Absolutely, but is that the most likely outcome? If there was as much fear and uncertainty as the bears claim, prices would be falling a lot more than 0.15%.
Until proven otherwise, I will continue trading against these periodic swings, not betting on their continuation to extreme levels.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 came back from the long weekend in a foul mood, shedding another 2% and finishing at the lowest levels since late January.
Half-full or half-empty? Thus far the pessimists have been dominating the market’s mood. The current line of reasoning is the economy is “too good” and that will require the Fed to be even more aggressive with its rate hikes to push the economy into a recession.
The problem with this line of thought is the Fed is not trying to push the economy into a recession. If the Fed can tame inflation without a recession, that would be the best possible outcome. But so far traders are more fixated on the half-empty side of the glass and don’t want to think about positive interpretations of recent data points.
But for all of the people calling for the indexes to tumble another 10% from here, I just don’t see it. We reached those 2022 lows when fear and uncertainty were at their peak. When we had no idea how high inflation would get, how devastating the rate hikes would be, or how bad the energy situation would get following Russia’s invasion of Ukraine.
Well, over the last year we gained a lot more clarity. Inflation is no longer spiraling out of control and has come a long way off of the summer highs near 9%. Consumers still have jobs and money to spend. And Europe is navigating the energy crisis a lot better than many envisioned. So what’s not to like?
In truth, the market’s recent slump is a lot easier to explain, stocks rallied nicely off of last year’s lows and it is simply time for one of those very normal and healthy stepbacks. Nothing more and nothing less.
Despite what the naysayers claim, we are actually navigating all of the risks surrounding us quite nicely. Inflation is coming down and the current 6% readings are exaggerated because the way rent is calculated doesn’t show the month-to-month declines in lease renewal rates.
Rather than run and hide, this is the time to be looking for the next buyable bounce. Friday’s midday bounce looked good to me and I bought a partial position, but obviously, it didn’t work. Fortunately, my trading starts small, gets in early, and kept a stop nearby. So while Friday’s bounce didn’t work, it didn’t cost me much.
In fact, Tuesday’s wave of selling is actually good for me personally because it means I will be able to make even more money buying the next bonce. And if the next bounce fails, that’s alright too, I get out and try again from even more attractive levels.
A lot of traders need to be right, lucky for me, I’m only here to make money and that makes navigating these whipsaws so much easier.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 lost another 0.3% on Friday, turning this into the second losing week in a row. (That said, the weekly loss was a very inconsequential 0.3%.)
Friday’s session kicked off very ominously by crashing under 4,100 support, a level that had been propping up the market all February long. But rather than unleash a tidal wave of reactionary selling, supply dried up and prices bounce off of 4,050.
So much for teetering on the edge of a massive breakdown. The market violated support and most owners shrugged and kept holding. And most optimistic of all, Friday’s session finished at the intraday highs.
But this contrarian price action doesn’t surprise readers of this blog, as I wrote Thursday evening:
This is the “opposite market” and the smart trade is going against conventional trading signals instead of following them. Maybe stocks open poorly Friday, but rather than jump aboard the selling bandwagon, be on the lookout for that next bounce because odds are good it will come hard and fast.
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Remember, it’s not how we start, but how we finish that matters most. And Friday was yet another session where the bears tried to break the market and failed. Sure, we finished in the red, but starting low and finishing at the intraday highs is bullish, not bearish.
Trading would be so much easier and more fun if every session ended in the green. But we know that’s impossible and down days are inevitable. But at this point, I don’t see anything in this price action that says this is anything other than a very vanilla consolidation of recent gains under 4,200 resistance.
Making money gets so much easier after we shed our bull and bear biases and trade what is in front of us. This market doesn’t want to go up and it doesn’t want to go down, so stop getting fooled by these false alarms. Until further notice, these dips are buyable and the bounces are sellable. And if we are not taking profits when we have them, the market will steal them back a few hours later.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Thursday’s session was one of those days where both bulls and bears got their butts kicked and the market proved it is still the boss.
The session started poorly for the S&P 500 after January’s PPI report showed wholesale inflation remains stubbornly resilient. That headline sent the index tumbling 1.5% shortly after the opening. But just all hope was lost and bears were feeling their most confident, supply dried up and prices bounced hard, recovering a majority of those early losses by Thursday afternoon.
This bounce shouldn’t have surprised anyone. First, the PPI data wasn’t new or unexpected and it fell in line with recent Fed, consumer, employment, and economic data. If equity owners weren’t dumping stocks following last week’s headlines, why should we think this PPI report would suddenly change their minds?
That midday bounce send bears scrambling for cover as the index recovered a majority of those opening losses. But what’s good for the goose is good for the gander. Just when bulls were starting to feel good about themselves, the market pulled the rug out from underneath them and sent stocks tumbling back to the opening lows.
Just like the early bounce, Thursday’s late retreat shouldn’t have surprised anyone either. As I’ve been writing for weeks, this is a choppy market and that means lots of back-and-forth. In fact, Wednesday evening I reiterated that sentiment when I told readers:
No matter what the bulls and bears claim, this market is not going to explode higher and it is not going to crash lower. But that’s okay for the savvy and opportunistic trader. Buy the dip, sell the bounce, and repeat as many times as the market lets us. But remember, if we are not collecting profits early and often, the market will take back all of those profits and turn our trade into a loser.
And for good measure, on Monday I said:
Keep buying the dips and selling the pops because this market is going nowhere fast. This choppiness means we need to collect profits early and often because holding a few hours too long is the difference between worthwhile profits and watching a winning trade turn into a loser.
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I could go on and on with similar statements from previous posts because we’ve been in this sideways grind for a while. Anyone trying to trade the next breakout or breakout is getting chewed up by these reversals. But that doesn’t stop bulls and bears from making the same mistakes again the next day.
No one can trade these wild whipsaws perfectly, so don’t even try. But when you have a profit, you better be taking it because odds are good it will be gone in a few hours.
As for what comes next, expect more of the same. As bad as Thursday’s close looked, Wednesday’s close looked good. And we saw how that turned out. This is the “opposite market” and the smart trade is going against conventional trading signals instead of following them.
Maybe stocks open poorly Friday, but rather than jump aboard the selling bandwagon, be on the lookout for that next bounce because odds are good it will come hard and fast.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished Wednesday’s session up a modest 0.3%, but if you only looked at the finishing print, you’d miss everything the market was trying to tell us.
It’s not how you start, but how you finish that matters most. And while no one is getting excited by a 0.3% gain, the market started the session down 0.8% and finishing in the green is actually a noteworthy accomplishment.
The thing about Wednesday’s resilience is it mirrored Tuesday’s bounce back from the midday lows. Lucky for readers, everything I wrote in Tuesday evening’s blog post was fully on display during Wednesday’s session:
The reflexive selling Tuesday morning would have triggered a bigger follow-on wave of selling if this market was overbought and vulnerable. Instead, supply dried up as most equity owners shrugged and kept holding. That tells us the ground under our feet is far more solid than most people think.
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Wednesday was strike two bears, adding more proof to the idea that this market wants to go up not down. A market that refuses to go down will eventually go up and it is only a matter of time before we are challenging 4,200 support again.
That said, we don’t want to get too excited because this market is still consolidating January’s gains under 4,200 resistance. As much as I’d love to see the index explode higher, it simply doesn’t have the energy to do that right now. Instead, expect this back and forth under 4,200 to continue.
No matter what the bulls and bears claim, this market is not going to explode higher and it is not going to crash lower. But that’s okay for the savvy and opportunistic trader. Buy the dip, sell the bounce, and repeat as many times as the market lets us.
But remember, if we are not collecting profits early and often, the market will take back all of those profits and turn our trade into a loser. Don’t let that happen to you.
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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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