End of Day Analysis Archives - Page 5 of 56

Aug 18

Why Friday was a good day for the bulls

Free After-Hours Analysis:

The S&P 500 ended Friday’s session exactly where it left off Thursday. While it is tempting to call 0.0% a tie, this actually counts as a win for the bulls.

First, following three big down days, not falling for a fourth session is a meaningful accomplishment. Big stock crashes accelerate lower, and Friday’s 0.0% breaks our losing streak.

Second, stocks started Friday’s session deep in the red. Lucky for us, that opening low was as bad as it got, and stocks spent the rest of the session climbing out of that hole, ultimately recovering all of those losses by the close.

Luckily, my readers were not surprised by Friday morning’s rebound. This is the exact setup I told readers to be ready for Thursday evening, and hopefully, you were one of the many people who profited from this great setup:

As bad as Thursday looked, the thing to remember is this is the way it usually feels right before the bounce. We can debate how bad it needs to get before this gets good, but without a doubt, we are closer to the bottom than we were on Tuesday or Wednesday.

The nice thing about one-way selloffs like Thursday is they tend to bounce early the next session. That means if we buy early enough, that initial bounce will give us a handy profit cushion to play with.

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Friday morning, confident stock owners refused to join the herd selling. That’s all it took. No matter how bad things feel, once we run out of sellers, prices stop falling. That’s basic supply and demand.

At this point, confident owners are telling the market that enough is enough. That doesn’t mean the selloff cannot continue next week or next month. But for the moment, the bulls are back in charge.

This bounce is only a few hours old and remains fragile, but this is the price action we were waiting for.

By acting decisively Friday morning, we already have a nice profit cushion and can move our stops up to our entry points, greatly reducing our risk. If this bounce is the real deal, the profits will keep rushing in. If this is another fake bottom on our way lower, we get dumped out near our entry points and get to try again next time, no harm, no foul.

As for next week, if the index retreats back to Friday’s intraday lows, all bets are off. But until that happens, we have the green light to keep holding, adding, and lifting our stops.

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Aug 17

What nimble traders are doing Friday morning

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 tumbled another 0.8% Thursday as the wave of reflexive selling continued.

The index violated 4,450 support and the 50dma earlier in the week, and the latest victim was 4,400 support.

Wednesday’s weak price action left me watching Thursday’s tumble from the safety of the sidelines. When I have cash, I’m always looking for the next bounce, but Thursday’s price action didn’t give me an entry point and that means I’m still in cash. No harm, no foul.

As I wrote on Wednesday:

I hope prices will fall even further on Thursday and Friday. But if they don’t, I will be one of the first standing in line to buy the next bounce. I’d love to get in at much lower prices, but I don’t get to choose what the market gives me. If this wants to bounce at 4,400, I’m a buyer. If it waits until 4,300 to bounce, that’s even better. The only thing that matters is I don’t get left behind when the bounce finally arrives.

Remember, we don’t buy dips, we buy bounces. And as always, start small, get in early, keep a nearby stop, and only add to a position that’s working. Follow those simple rules and we will be ready for whatever comes next.

As bad as Thursday looked, the thing to remember is this is the way it usually feels right before the bounce. We can debate how bad it needs to get before this gets good, but without a doubt, we are closer to the bottom than we were on Tuesday or Wednesday.

The nice thing about one-way selloffs like Thursday is they tend to bounce early the next session. That means if we buy early enough, that initial bounce will give us a handy profit cushion to play with.

If the market capitulated Thursday, Friday’s early bounce will keep running and won’t look back. In that case, keep holding, adding, and letting those profits come to us.

On the other hand, if another wave of selling is headed our way, that early bounce will fail and the sell-off will resume. In that case, we pull the plug at our entry point and try again later Friday afternoon if the market attempts another bounce. But if Friday ends in another one-way selloff, that’s no problem. We buy Monday morning’s bounce and do this all over again.

Markets move in waves and no matter where this is headed over the medium and long term, a near-term bounce is headed our way. For nimble traders, that’s a profit opportunity. Don’t miss it.

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Aug 16

4,450 support failed. How smart money is trading what comes next

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 decisively broke through 4,450 support and the 50dma on Wednesday. The index now finds itself just a hair above 4,400. And so continues the reflexive selling that started early Tuesday after China lowered rates in an attempt to revive its sluggish economy.

Stocks go up and stocks go down. No one should be surprised by this pullback from 4,600 following a nearly 800-point rally since January.

As I wrote back in late July when the index was testing 4,600:

The run to 4,600 was a good one, but rather than greedily hold for higher prices, I collected worthwhile profits and got ready for the next trade. At this point, I’m looking at 4,600 as a tipping point. Either we keep going higher, or we don’t. If the rally resumes later this week or next week, I will buy back in. But if the market is finally ready to take a break and cool off, I’m happy to short the step back to 4,400 support.

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Readers know I collected my short profits last week as the dip stalled near 4,450 support. A continued pullback to 4,400 was always possible, but I’m never one to risk holding too long when I have worthwhile profits in hand. In my opinion, there is no greater crime than letting a good trade turn bad, so I always err on the side of taking profits too early.

When the market attempted a bounce off of 4,450, I even gave the long side a shot again with a small position and a nearby stop. As everyone knows by now, that 4,450 bounce didn’t stick.

While buying this bounce didn’t work, I don’t mind. My loss on a partial position with a nearby stop was trivial. And to be honest, the lower this goes now, the more money I make buying the next bounce, so I’m actually happy my initial trade failed and I get to buy an even bigger discount when this finally bounces.

I hope prices will fall even further on Thursday and Friday. But if they don’t, I will be one of the first standing in line to buy the next bounce. I’d love to get in at much lower prices, but I don’t get to choose what the market gives me. If this wants to bounce at 4,400, I’m a buyer. If it waits until 4,300 to bounce, that’s even better. The only thing that matters is I don’t get left behind when the bounce finally arrives.

Remember, we don’t buy dips, we buy bounces. And as always, start small, get in early, keep a nearby stop, and only add to a position that’s working. Follow those simple rules and we will be ready for whatever comes next.

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Aug 15

Why I’m happy I was wrong

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 is teetering on the edge after the index shed -1.2% Tuesday and closed at the lowest levels in a month.

This retreat leaves the index just under 4,450 support and the 50dma. But at this point, the violation has only been by a handful of points, and we haven’t gone flying off the edge…yet.

China cut interest rates in the middle of the night as their officials struggle to restart their stalling economy. This move unnerved investors and kicked off Tuesday’s big wave of selling in US markets. But as I’ve written previously, it’s been years since China’s economy mattered to US stocks. Between Trump’s trade war and China’s multi-year lockdowns, the Chinese economy hasn’t mattered to the rest of the world in a long time.

Anything can trigger an impulsive wave of selling, but very few investors are basing their US equity buying decisions based on what China is doing. Even if China continues skidding, its consumers have largely shunned US brands in favor of domestic producers, so even their slowing consumption won’t put much of a dent in US corporate earnings. This whole thing is a non-issue.

That doesn’t mean US stocks can’t slip for a few more days, especially if the selling continues Wednesday and we undercut the next tranche of automated stop-losses. But even if the selling keeps up for another day or two, this is a buying opportunity and we need to be ready to jump aboard the next bounce.

As readers know, I liked Monday’s bounce and I was a buyer. I won’t deny that Tuesday’s poor open stung. Lucky for me, I recognized the risks of buying this market and I was careful. As I described on Monday:

Monday’s bounce was buyable with a stop near Friday’s lows. Start small, get in early, keep a nearby stop, and only add to a trade that’s working. If the selling resumes later this week, no big deal, pull the plug at our stops and try again next time. It really is that simple.

As it turned out, I was wrong. I got dumped out for a modest loss on a partial position, and you know what? It wasn’t that bad. No one is right all of the time, and that includes me. That’s why all of my positions start with defense in mind.

As for what comes next, just because I got dumped out on Tuesday doesn’t mean I’m giving up on this trade. If stocks bounce on Wednesday or even next week, I will be there to jump on those discounts. In fact, the lower we go now, the more money we can make buying the next bounce. That means I’m hoping I continue being wrong on Wednesday and Thursday. Bring on an even bigger wave of panic selling! After my stops moved me to cash, the lower we go, the better.

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Aug 14

Why bulls still have the advantage

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 started the week off on the right foot, adding 0.6% Monday.

Headlines didn’t say much, and the lack of bad news allowed this market to continue trading within a few percent of 52-week highs.

Monday’s resilience won’t surprise readers. As I wrote last week:

[T]he index’s wedging price action lower can actually be bullish. After countless attempts, the best bears can do is knock a few points off of the market at a time. If there was real downside potential here, these five and ten-point violations would spiral into 50 and 100-point losses within hours. The fact so few owners are interested in selling each day’s successive new low suggests we are on the verge of running out of supply and bouncing.

As much as people want to hate this too-high, too-far, too-fast market, it continues holding up amazingly well. Elevated inflation, multi-decade high interest rates, deflation in China, a lingering regional banking crisis, and everything else the critics are throwing at this market, but none of it is sticking.

Quite simply, if this market was going to break down because of any of these well-known problems, it would have happened by now.

Say what you want about the market’s stubbornly optimistic mood, but nothing the critics say is changing it. Rather than fight the tide, smart money is along for the ride.

Without a doubt, the index slipped 150 points from recent highs. But that’s a good thing! A) Everyone knows the market moves in waves. And B) a little cooling off is good for the long-term sustainability of a bull market.

We can argue over whether 150 points and a couple of weeks is enough to reset a multi-month rally. But at this point, anyone claiming we are on the verge of the next big crash is simply not paying attention. If this market was going to crash on well-known headlines, it would have happened many months ago.

If the market is ignoring these things, smart money is ignoring them too. To do anything else means giving money away, and only stubborn fools do that.

Monday’s bounce was buyable with a stop near Friday’s lows. Start small, get in early, keep a nearby stop, and only add to a trade that’s working. If the selling resumes later this week, no big deal, pull the plug at our stops and try again next time. It really is that simple.

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Aug 11

Why this week’s red closes are actually bullish

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 spent most of Friday bouncing around just under breakeven before finishing the session -0.1% in the red.

While red is red, Friday’s price action wasn’t all that bad. The index opened at one-month lows Friday morning, but within a handful of minutes, those sellers disappeared and prices bounced off of those early lows, even spending a portion of the day in the green.

Most noteworthy is the initial push to fresh lows didn’t trigger a follow-on wave of selling. In fact, it was quite the opposite, with buyers taking advantage of those discounts as they pushed the index above those early lows.

As I’ve written previously, the index’s wedging price action lower can actually be bullish. After countless attempts, the best bears can do is knock a few points off of the market at a time. If there was real downside potential here, these five and ten-point violations would spiral into 50 and 100-point losses within hours.

The fact so few owners are interested in selling each day’s successive new low suggests we are on the verge of running out of supply and bouncing. Quite simply, if we were going to crash, it should have happened by now.

To be clear, few things shatter confidence like tumbling prices, so the longer we hold near the lows, the more vulnerable we are. But as long as each fresh low keeps being met with indifference, the market is actually setting up for a bounce despite all the red closes we’ve seen over the last two weeks.

As I wrote on Thursday:

As crazy as it sounds, I will be happy to buy a bounce off of 4,450 Friday

That’s is exactly what I did. Start small, get in early, and keep a nearby stop.

This trade might not work, but I liked the way it set up, and by starting small, getting in early, and keeping a nearby stop, my risk is low. If prices fall on Monday, it is no big deal. I take my lump and get ready for the next trade. But if it works, I add more and lift my stops.

It really is that simple.

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Aug 10

The uptrend is not broken yet, but we are in dangerous territory

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 finished Thursday’s session essentially unchanged, but anyone who only saw that flat close would have no idea of the wild ride the market took us on.

Before the opening, we got the latest CPI data that showed inflation trucking along at a 3.2% rate in July. Not good, but also not bad. In fact, this initially appeared to be the Goldilox number many investors hoped for, and prices surged more than 60 points shortly after the open. So far, so good. Unfortunately, the market had other plans.

Rather than attract a follow-on wave of buying, big money started selling the early strength until it was all gone, and we finished the day right back where we started.

While we should resist the urge to get overly pessimistic following a session that closed flat, it is hard to find much good to say about Thursday’s price action.

This was the third time in recent weeks the market took a strong open and fumbled it into a disappointing close. Remember, how we close matters far more than how we start. And by that measure, it is hard to get excited about the market’s mood. We’ve passed up multiple opportunities to bounce back to the highs because the sellers keep taking over.

I’m not going to give up on this market just yet because trends are far more likely to continue than reverse, but we can only give it so many free passes before we have to take a far more critical look. 4,450 has been acting as support this week and the 50dma is quickly catching up. Stay above these key technical levels and smart money is still giving the uptrend the benefit of the doubt. But fall under these levels and all bets are off.

As crazy as it sounds, I will be happy to buy a bounce off of 4,450 Friday, but I will start small and keep a nearby stop because if the selling returns, it will get ugly and we shouldn’t expect 4,450 to save us again.

On the other hand, if a violation of 4,450 turns devolves into a waterfall selloff, that becomes a nice short entry with a stop just above Thursday’s close.

The market is at a tipping point and about to break strongly in one direction or the other. While bulls and bears are busy arguing over who is right, I’m waiting for the market to reveal its hand so I can jump aboard the next move. As long as I’m making money, it doesn’t matter to me who is right.

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Aug 08

Why Tuesday’s early wave selling didn’t go anywhere

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

It’s been a choppy few sessions as the S&P 500 takes a step back from 4,600 resistance.

Between a sluggish Chinese economy and renewed scrutiny of regional banks, overnight futures traders were not in a good mood Tuesday morning and the index skidded more than 1% in early trade. But as ominous as that open felt, most investors shrugged and didn’t sell. The initial wave of selling stalled 90 minutes after the open and the index bounced more than 30 points by the close. Even though the session ultimately closed down 0.4%, considering how the session started, it was a good day for bulls.

As I’ve written in previous posts, the domestic equity market hasn’t cared about China in years and the regional banking crisis is old news. If these events hadn’t taken us down previously, there is little reason to think Tuesday’s headline reruns would turn out any differently. While any headline can trigger momentary bouts of second-guessing near recent highs, we need something truly new and unexpected to flip the market’s stubbornly half-full mood.

At this point, this latest test of 4,500 support looks like nothing more than a vanilla step back following a big run higher. Without a doubt, the selling can resume, but given this afternoon’s nice bounce, it doesn’t look like this is the end of the uptrend.

For the nimble, Tuesday’s bounce was buyable with a stop under those early lows. If the bounce continues on Wednesday, add more and lift stops. If the selling returns, get out and wait for the next opportunity. This is an easy setup for those with the courage to take advantage of the market’s momentary second-guessing.

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Aug 03

Why the debt downgrade selloff could already be over

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 slipped another quarter percent Thursday, adding to Wednesday’s US debt downgrade selloff.

But as far as selloffs go, Thursday’s decline was fairly benign. The index hit its lowest point early in the morning, and prices were comfortably above those initial levels for the remainder of the session, even getting into the green for a bit.

Lucky for readers, Thursday’s midday bounce wasn’t a surprise:

We traveled this road 12 years ago, the last time US debt was downgraded. That 2011 episode launched a meaningful, multi-month selloff in stocks. Are we in store for the same thing this time? No, probably not.

Novel events trigger fear and uncertainty because no one knows what is going to happen and with nothing to go on, people often fear the worst. But since we’ve already been down this downgrade path, there will be far less uncertainty this time.

Less uncertainty = less anxiety = less impulsive selling

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Runaway selloffs, well…runaway. They crash day after day and don’t look back. Thursday’s price-action was the opposite of runaway selling. The index opened low, and rather than rush for the exits, dip-buyers gobbled up the discounts and bid up prices.

The thing about panicked selloffs is we need panic. Thursday’s constructive trade took a load of pressure off of nervous owners. Another reassuring session like this on Friday and the 2023 US debt downgrade crash is already over.

Savvy traders recognized early Thursday that the next wave of selling wasn’t coming, and rather than argue with the market, they collected profits and got ready for the next trade.

Now, don’t get me wrong, we could definitely fall into another hole of impulsive selling on Friday, but at this point, the odds of that happening are not very good. If owners were going to panic, it should have happened on Thursday. Another flattish session on Friday and most owners will be breathing a sigh of relief since most investors are reluctant to sell their favorite stocks at a discount.

As for how to trade Friday, savvy traders are already in cash and ready to jump on the next trading opportunity. If the aggressive selling returns Friday morning, short that with a stop above Thursday’s close. On the other hand, if prices turn green on Friday, buy the bounce with a stop under Thursday’s lows.

As I wrote earlier in the week, I was positioned for this selloff, and it turned into a great trade with 3x leverage. But if the selloff is already showing signs of bouncing, it is time to collect profits and get ready for what comes next. I don’t care what happens as long as my trading plan keeps me on the right side of the market.

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Aug 02

Why savvy traders were ready and waiting for Wednesday’s tumble

By Jani Ziedins | End of Day Analysis

Free After-Hours Update:

The S&P 500 tumbled Wednesday after a rating agency downgraded US debt.

We traveled this road 12 years ago, the last time US debt was downgraded. That 2011 episode launched a meaningful, multi-month selloff in stocks. Are we in store for the same thing this time? No, probably not.

Novel events trigger fear and uncertainty because no one knows what is going to happen and with nothing to go on, people often fear the worst. But since we’ve already been down this downgrade path, there will be far less uncertainty this time.

Less uncertainty = less anxiety = less impulsive selling

But just because we won’t fall into another spiral of impulsive selling doesn’t mean this event cannot drag down equity prices over the near term. The market experienced a whole lot of up lately, and no matter the reason, these lofty prices left us vulnerable to a very routine and even healthy step back.

As I wrote on Monday:

At this point, I’m looking at 4,600 as a tipping point. Either we keep going higher, or we don’t. If the rally resumes later this week or next week, I will buy back in. But if the market is finally ready to take a break and cool off, I’m happy to short the step back to 4,400 support.

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There is no way I could have predicted this debt downgrade, but when stocks are this elevated, the next wave of selling is never far away.

Now that we have a potential catalyst to kick off the next wave of profit-taking, it is finally time to start challenging “too high.” Remember, smart traders never short strength, we wait until that strength starts crumbling.

Savvy traders were shorting Wednesday morning’s weakness. By getting in early, our stops are already adjusted to our entry points, making this a low-risk trade.

By being proactive, we limited our risks. If we are wrong, we won’t lose much. But if we are right, there are a whole lot of profits headed our way. Low risk and big rewards are the trades we dream of.

If the selling continues on Thursday, we can add more to our short position and lower our stops, giving ourselves even more protection. On the other hand, if prices bounce above Wednesday’s intraday highs, it is time to start pulling off our shorts. And if we rally back to Tuesday’s close, the selloff is already over and it is time to start buying the bounce.

I still think this weakness has room to run and 4,200 is a very realistic target. But I’m not married to that outlook and will change my views as soon as the market proves me wrong by bouncing back near recent highs.

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Jul 31

Is 4,600 finally too high?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 is pausing under 4,600 as it continues proving all of the cynics wrong.

Too high or not high enough? That’s the million-dollar question.

As high as stock prices feel at 4,600, people were making the same argument at 4,500, 4,400, 4,300, and even 4,200, and we know how that turned out.

At the same time, while high is more likely to get even higher, all good things eventually come to an end.

As a nimble trader, I don’t have an allegiance to either side in this debate. The run to 4,600 was a good one, but rather than greedily hold for higher prices, I collect worthwhile profits and get ready for the next trade. The market resolved to the upside at 4,200, 4,300, 4,400, and 4,500, and if we see the same thing at 4,600, I’m more than happy to buy the next breakout.

But until this actually starts rallying, I’m content sitting on my pile of profits on the sidelines. At this point, I’m looking at 4,600 as a tipping point. Either we keep going higher, or we don’t. If the rally resumes later this week or next week, I will buy back in. But if the market is finally ready to take a break and cool off, I’m happy to short the step back to 4,400 support.

Rally up to 4,700 or slip back to 4,400; it doesn’t really matter to me what happens next. All I’m doing is waiting for the market to reveal its hand, and then I’m jumping on that trade. Start small, get in early, keep a nearby stop, and only add to a trade that’s working.

Get above Friday’s highs, and I’m a buyer. Fall under Monday’s lows, and I’m going short.

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Jul 21

Why Friday’s failed bounce is good news for the half-empty crowd

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 attempted a midday bounce Friday as it tried to recover some of Thursday’s stumble following disappointing earnings from NFLX and TSLA. Unfortunately, the dip buyers failed to show up in meaningful numbers and the index finished Friday’s session flat.

But this lethargic price action was expected. As I wrote in Thursday afternoon’s free post:

While we can’t read too much into one day’s price action, recent gains across the market leave us vulnerable to some near-term weakness. I’m in no way predicting a top, but it wouldn’t surprise me if the indexes cooled down following this month’s impressive 200-point run to 4,600.

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Friday’s 0.03% session didn’t give us much to go on. The half-full crowd points to the stalled selloff. The half-empty side counters with Friday’s failed midday bounce.

Who is right? At this point, either side could be right. Lucky for us, the market is terrible at keeping secrets won’t be able to hide its cards for long.

If selling is truly over, prices will bounce nicely on Monday. If there is more selling left in this cool-down, expect another wave to hit us instead.

As far as trades go, this one is very straightforward; buy strength and sell weakness.

For those of us who shorted Thursday’s weakness, keep holding that short with nearby stops. If we get blown out of our positions on Monday, it’s no big deal. That’s the way trading goes. Thursday’s short was a low-risk/high-reward trade that was worth taking even if it didn’t work. But if the short keeps working Monday, press it and move our stops down to our entry points, turning this into practically a free trade.

For the long-only crowd, wait for the bounce. If it doesn’t happen on Monday, then expect a few more days of selling and a much better dip buying opportunity later in the week.

Start small, get in early, keep a nearby stop, and only add to a trade that’s working.

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Jul 20

Why taking worthwhile profits is never a mistake

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 finished Thursday down 0.7% as the index digested a poor performance by two of its highest profile components.

NFLX and TSLA tumbled after their earnings disappointed investors. It wasn’t that these companies performed poorly, but the higher prices get, the bigger the expectations become. And both of these companies failed to live up to the hype.

Are these two isolated incidents? Or do they threaten the market’s half-full mood?

While we can’t read too much into one day’s price action, recent gains across the market leave us vulnerable to some near-term weakness. I’m in no way predicting a top, but it wouldn’t surprise me if the indexes cooled down following this month’s impressive 200-point run to 4,600.

Two steps forward, one step back. Rinse and repeat.

While the market acted well Wednesday, sometimes we have to recognize good enough. If we’re not selling early, then we are holding too long.

This is exactly what I told readers in Wednesday afternoon’s free analysis:

Everything looks great, and that’s eactly why smart money is already peeling off some of their profits. As easy as it is to buy back in, we can always buy the next move above 4,600. But until that happens, we need to protect the profits we have now.

I don’t pick tops, but taking worthwhile profits after a good run usually gets me close enough. After a bit of up, the next bit of down is inevitable.

There is no way of knowing if Thursday’s dip will bounce Friday or keep going for a bit. But now that I’m in cash, it doesn’t matter to me what comes next. All I know is I will be ready for whatever profit opportunity arrives next.

Thursday’s weakness was shortable with nearby stops for the most aggressive traders. For everyone else, collect recent profits and get ready to buy the next bounce.

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Jul 19

What savvy traders are doing as we approach 4,600

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis

The S&P 500 added a quarter of a percent Wednesday as the good times keep rolling.

Headlines haven’t changed, and we continue coasting higher on recent employment and inflation data. At this point, reality is coming in far closer to the best-case scenario than anyone thought was possible earlier this year.

But for as good as this rally looks, 200 points in two weeks means we need to start watching our backside. The smart time to buy was back near 4,400, not now, as we are approaching 4,600. In fact, this is a far better place to be taking profits than adding new money.

Everything looks great, and that’s eactly why smart money is already peeling off some of their profits. As easy as it is to buy back in, we can always buy the next move above 4,600. But until that happens, we need to protect the profits we have now.

Once we acknowledge we can’t pick tops, the next decision becomes selling too early or holding too long. As a nimble trader, my preference is to sell too early because that means when other people are getting nervous watching their profits disappear, I’m in the perfect situation to take advantage of the next trade.

No doubt I’m peeling off profits too early, but as easy as it is to jump back in, my bigger fear is letting these profits escape. We don’t need to sell everything, but it is amazing how much better we feel after locking in some worthwhile profits and reducing our risk.

Remember, we only make money when we sell our favorite positions…

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Jul 17

Why smart money is still long this market

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 added 0.4% Monday, closing at yet another 52-week record as high keeps getting even higher.

Things are good, really good. All of the worst-case scenarios have been avoided, and we actually find ourselves close to the best-case scenario. After scoffing at the idea even just a few months ago, many people are finally starting to think the Fed could nail the soft landing of taming inflation without tipping the economy into a recession.

While the above shift in sentiment is good for near-term stock prices, the more hopeful people feel, the more vulnerable we are to disappointment. That means over the near term, we should be trading in the direction of the trend, but we need to be wary of anything that could put the market back in a bad mood.

Cautiously optimistic is the name of the game.

While fear of heights is normal, when June’s wobble didn’t go anywhere, rather than get stubborn, we recognized the market didn’t want to go down, and that’s why we embraced this bounce. Smart traders don’t argue with the market. If this wants to go higher, then we have no choice but to follow its lead. The next pullback is coming, but it is not here yet, and that means we keep trading this from the long side.

Stick with what is working. That means holding this bounce with stops at least as high as our entry points. If this wanted to go down, it would have happened already.

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Jul 06

Why Thursday’s early wave of selling stalled and bounced

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 skidded -0.8% Thursday after the monthly ADP report showed robust hiring, sending us back into the “good is bad” paradox.

The thing about “good is bad” is it’s an idea embraced mainly by retail traders. If institutional investors feared strong economic numbers, the indexes would not be hovering near 52-week highs. But since this is a holiday-affected week and big money managers are on vacation, retail investors have oversized influence. That’s why we get things like Thursday morning’s reflexive 1.3% tumble at the day’s worst.

The silver lining is the index bounced decisively off those late-morning lows after running out of sellers. This is the slowest week of the already slow summer season. While that often leads to sleepy sessions, the low volumes also leave us vulnerable to elevated volatility because it doesn’t take much buying or selling to trigger oversized moves.

As dramatic as these moves feel in the heat of battle, the light volume also means these little traders run out of money quickly. And at this point, it looks like they could only keep up the selling for two hours before supply dried up and prices bounced.

Without big money’s guiding hand, anything could happen on Friday, but at this point, it looks like smaller retail traders ran out of things to sell and Friday should be better.

Following the crowd’s panicked moves is tempting, but it is often best to watch these gyrations from the sidelines, especially during these erratic holiday-affected sessions. I didn’t need to join Thursday’s selling and I didn’t need to join the afternoon buying either. Better and more reliable trades are coming our way and I’ll leave this chop to the impulsive gamblers.

At this point, I’m comfortable waiting and watching Friday’s trade unfold from the sidelines. If the selling accelerates, the best trading opportunity will be buying next week’s bounce after big money returns and undoes all the damage these impulsive retail traders did when left to their own devices.

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Jun 23

Why the tide is turning against the Bulls

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 skidded 0.8% Friday, making this the fourth loss out of the last five sessions.

Nothing much changed in the headlines. Inflation remains higher than the Fed wants, but the economy is stubbornly resilient in the face of rising interest rates. A few months ago, investors were obsessed with the half-empty portion of the glass. Now all they see is half-full.

But with a massive amount of buying in the rearview mirror, we need to find new buyers to keep pushing prices even higher, which is getting increasingly difficult. That doesn’t mean it can’t happen, just that the odds of a near-term cooling off are growing with each passing day.

The rally paused this week, and the index remains stuck under 4,400 resistance. Get back above this key psychological level and it is full steam ahead. But until that happens, the smart move is trading this cooling off.

As I explained in Tuesday’s Free Analysis: “Why Tuesday’s step back still has room to run”

At this point, this violation of 4,400 is guilty until proven innocent. If we can’t get back above 4,400 Wednesday, position yourself for more selling. The most aggressive can keep holding their shorts with stops near [last] Friday’s close. For everyone else, keep waiting and watching for the real bounce because Tuesday afternoon probably wasn’t it.

No one knows what the future holds. The best we can do is trade what’s directly in front of us, and right now, that means trading this latest cool-down. We rallied hundreds of points over the last few weeks, and it takes more than 50 points and a few days to reset the clock.

Shorts can keep holding their shorts and those that want to buy the dip need to sit on their hands a little longer because this dip still has a ways to go before it is done.

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Jun 22

Why Thursday’s gains won’t save the bulls

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 added 0.4% Thursday, ending a three-day skid that pulled the index off of 52-week highs.

We didn’t need bullish headlines to rally up to 4,400, and that means we don’t need bearish headlines to pull back from those highs either.

Stocks go up and stocks go down, that’s what they do. As much as people want to believe every headline matters and every movement is based on some fundamental driver, the simple truth is the market is like a toddler with ants in his pants and most of the time it moves enthusiastically for no reason at all.

That said, these reasonless moves are not random. Trends are more likely to continue than reverse, but eventually, every bit of up is followed by a bit of down.

Currently, the market finds itself at one of those tipping points where either momentum keeps pushing the indexes higher, or we’ve come far enough that it is time to start going in the other direction.

It’s been a great run from the March lows, but that also means we are getting close to the next down wave. While Thursday’s modest gains were a relief for bulls, the truth is, this 0.4% gain was anything but a decisive rebound.

Everyone knows stocks don’t move in straight lines and declines are littered with green days. The odds are good Thursday’s gains was nothing more than a little bounce on our way lower.

Now to be clear, I’m not a bear and I’m definitely not calling for a crash, but rallying 200 points from the start of June and 600 points in four months means the time for rest is close, if it is not already upon us.

I started shorting this market Friday and my stops have already been moved past my entry points, turning this into a low-risk/high-reward trade. There isn’t anything else do other than relax and let the profits come to me.

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Jun 21

Why we haven’t seen the worst of the selling yet

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 slipped on Wednesday, giving up 0.5% and falling for the third day in a row.

No doubt the financial press found some excuse to justify Wednesday’s decline, but the simple truth is stocks move in waves. After several weeks of up, it’s time for a bit of down. Two steps forward, one step back. Rinse and repeat. This latest wave of selling is no more meaningful than that.

But as I’ve said many times before, the market loves symmetry, which means the inevitable step back will reflect the scale of the prior runup. That means this step back has the potential to offset a four-month rally that added 600 points.

Now, we don’t need to offset the entire run from the 2023 lows, but even retrenching a portion of the rally from 4,200 will require more than three modest days of selling.

I still like this market and am in no way calling for a crash back to the lows. But I also know stocks move in waves, and it’s been a great ride to this point. At the very least, even bulls should be expecting a near-term cooling off, and 4,200 support is very much on the table.

We take profits when we have them because if we don’t, we won’t have profits left to take. That means longs should have already been locking in some of their profits proactively and protecting the rest with nearby trailing stops.

As for the bold, there is still more downside left in this short, and we are nowhere near capitulation. Keep holding those shorts and move our stops down to at least our entry points, making this a low-risk/high-reward trade.

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Jun 20

Why Tuesday’s step back still has room to run

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 fell nearly 1% in early trade Tuesday as second thoughts came roaring back following last week’s strong surge higher.

The index slipped under 4,400 at the open and it wasn’t able to reclaim this psychologically significant level despite a nice midday bounce.

This is a tipping point. Either the index gets back above 4,400, or it doesn’t. If we get turned back by this level Wednesday, the selling will likely continue for a few more days.

On the other hand, if the index closes decisively above 4,400 Wednesday afternoon, then the worst of the selling is already behind us and higher prices are coming our way.

My intuition and experience tells me the selling still has a way to go before it is finished. The market loves symmetry, and big runs like we experienced over the last few weeks are always followed by similarly enthusiastic step-backs.

At this point, this violation of 4,400 is guilty until proven innocent. If we can’t get back above 4,400 Wednesday, position yourself for more selling. The most aggressive can keep holding their shorts with stops near Friday’s close. For everyone else, keep waiting and watching for the real bounce because Tuesday afternoon probably wasn’t it.

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