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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 finished the first day back from the long holiday weekend down a modest 0.2%.
Not much happened headlines wise and this continues to be a sentiment-driven market. Given how the index rests nearly 200 points above where it started the year, there has definitely been a thawing of last year’s half-empty way of looking at things.
While the economy is still struggling with some headwinds, we clearly avoided last year’s worst-case scenario and stock prices are rallying on this less-bad-than-feared news.
But for as nice as this 200-point rally looks in the rearview mirror, we are currently struggling with the triple-witching of 4k resistance, the 2022 downtrend line, and the 200dma. Any one of these is more than enough to put the lid on a rebound, and all three of these did exactly that a various points in 2022.
So the question becomes, should we be afraid of another rejection, especially with all three hitting us at the same time?
While there are lots of reasons to doubt this rebound, we trade the price action, not our beliefs and fears. Sure, these hurdles could send prices tumbling back to the lows. But until they actually start doing that, we have to give this rebound the benefit of the doubt.
A trend is far more likely to continue than reverse, and no matter what anyone else says, the trend is higher. Without a doubt, we should expect some choppiness near these significant technical hurdles, but until these resistance levels actually break the market, we should be positioned for the continuation, not the reversal.
The greatest advantage of being an independent trader is the nimbleness of our size. We don’t need to trade the breakdown until after it starts happening. If our trailing stops get hit, we get out. Until then, keep riding this wave higher.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Thursday’s trading session took the S&P 500 on a wild ride, but you wouldn’t know it if all you saw was the day’s modest 0.3% gain.
The extreme volatility kicked off after the monthly Consumer Price Index showed inflation falling for the sixth month in a row. While no one is excited by 6.5% inflation, it sure beats the 9% recorded back in June. And even more impressive, some categories actually saw price declines from November.
While it is premature to claim the inflation beast has been slain, there is enough history to say conclusively inflation is not spiraling out of control. It won’t get resolved nearly as quickly as some are hoping, but we are definitely headed in the right direction.
The most impressive thing about Thursday’s wild swings is how balanced they were. Every bit of down was matched by a bit of up and almost every bit of up was matched by an equally sized bit of down. To the point where within minutes of the close, the index was tracking near breakeven before a minor lift gave us that modest 0.3% gain.
Stocks couldn’t sustain a move on the CPI data because it didn’t change anyone’s mind. Bears were just as bearish as bulls were bullish. Prices don’t move when people don’t change their minds and this morning’s just-right result split the difference.
While it would be easy to call this a tie, in this instance the tie-breaker goes to the prior trend, which is up. In addition, as easily as stocks fall, holding steady is another win for bulls.
It doesn’t look like a lot happened Tuesday, but until something changes, bulls are still in control of this market.
The next big hurdle is the 200dma and 4k resistance. These technical levels proved too much for the market to overcome back in November and December. Will this time be any different? Only time will tell, but until prices actually start falling, we have to keep giving the benefit of the doubt to the rebound.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 added 1.3% Wednesday and the index now finds itself at the highest levels since early December.
So much for Monday’s ugly intraday reversal. But that’s the way this goes sometimes. If this were easy, everyone would be rich. The market frequently throws curveballs at us and Monday was one of those days. Sometimes it has to convince us we are wrong moments before proving us right.
The key to surviving these whipsaws and false alarms is staying nimble and having a solid trading plan. Anyone winging this is getting eaten alive as they keep getting fooled into buying high and selling low. But if we have a thoughtful trading plan that gets us in early and gets us out early, then not only are we surviving these whipsaws, we are actually thriving in this volatility.
As hard as it was to buy Tuesday’s rebound following such awful price action on Monday, that was clearly the right call. And a savvy trader was adding even more money Wednesday morning. Big money came back from Christmas vacation in a buying mood and smart money is following those whales.
Now that the index is well above our entry points, we can lift our stops, making this a low-risk trade where at worst we get dumped out for breakeven.
If we’re right, we make money. If we’re wrong, we lose nothing. It is impossible to beat that risk/reward.
4k resistance and the 200dma are up next. These were stumbling blocks back in November and December. But at this point, the market is acting well and deserves the benefit of the doubt. That means we keep riding this wave until it breaks down. Move stops up and see where this goes.
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By Jani Ziedins | Free CMU
Free After-Hours Analysis:
The S&P 500 added 0.7% on Tuesday, bouncing back from Monday’s ominous intraday reversal. Not bad given how poor Monday’s price action appeared.
If there is one hard and fast rule in the stock market, it is there are no hard and fast rules in the stock market.
Monday morning’s impressive breakout above 3,900 resistance fizzled and evaporated by the close. That intraday reversal is about as bearish as price action gets. But as is always the case, trading signals operate in probabilities, not absolutes.
While a majority of the time price action like Monday’s leads to further declines, it didn’t happen this time, which is normal and expected. Even something that works 80% of the time will still fail one time for every four times it succeeds.
The lack of guarantees in the markets is why I always trade with contingencies in mind. Even though I liked the short setup Monday afternoon, I started with a partial position and placed a stop nearby. That way, if I was wrong, I had an exit plan in place. And it’s a good thing because I ended up using that exit plan Tuesday and that is the only reason my losses were so modest.
No one is ever right all the time, but traders that succeed over the long term make sure their trading plan limits their losses when they are wrong.
While seeing how things turned out Tuesday, it would be easy to say shorting Monday’s intraday reversal was a mistake, but starting with a small position and a nearby stop, my loss was far smaller than the potential reward if I got it right.
I will take that trade every day of the week because while it didn’t work this time, it will produce big profits more often than not.
Small losses and big rewards are how we make money in the market.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 started the second week of 2023 off well enough, adding more than 1% and extending Friday’s employment-fueled gains. Unfortunately, those midday gains proved fleeting and the index retreated back to breakeven by the close.
Over the last few weeks, we could have written off this impotent price action because institutional money was on vacation and this was nothing more than over-active retail traders running amok. But by now most institutional money managers are back in the office and that means this price action counts.
And Monday’s failed breakout doesn’t look good. Stocks rallied to start the week and rather than embrace the strength, big money turned its back and let prices fall.
While one day can’t kill a market by itself, it can put a serious dent in any rebound attempt. Fall much lower and all of Friday’s gains are vulnerable.
The market is at a critical tipping point and how it responds Tuesday will tell us a lot about the market’s mood going forward. Retreat back to 3,800 over the next few sessions and 3,600 becomes the next most obvious target. But on the other hand, if buyers return Tuesday, Monday’s indigestion is forgotten and 4k is up next.
Plan your next trade accordingly.
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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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