Category Archives for "End of Day Analysis"

Jan 03

How smart money is approaching this shorting opportunity

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slipped another 0.8% Wednesday, making this three down sessions in a row.

So much for the Santa Claus rally. All of last week’s profits are gone, and then some. As I warned readers in December, anyone who didn’t lock in profits risked giving it all back by holding too long. And that’s exactly what happened:

[S]mart traders are sitting on a big pile of profits they collected last week and are getting ready for the next big trade. Maybe that’s shorting the reversion trade later this week. Maybe that’s sitting in cash until something more interesting happens in January. Either way, anyone expecting these big gains to keep rolling in clearly doesn’t understand how markets work.

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Now that the index is teetering on 4,700 support, the crowd is wondering what comes next. The answer is easy: either stocks bounce…or they don’t.

The index broke the very steep and very straight-up rally from the October lows. Since the market loves symmetry, a rally that goes too far tends to be followed by a pullback that goes too far, too.

Unfortunately, as easy as that sounds, trading successfully is anything but easy. Expect lots of misleading bounces along the way (a sawtooth decline), which could start as early as Thursday. Remember, if this were easy, everyone would be rich.

At this point, the pullback deserves the benefit of the doubt. Anyone who shorted Tuesday or Wednesday morning is sitting on small but comfortable profits, and they can lower their stops to somewhere between Tuesday’s intraday highs and their entry points, greatly reducing their risk.

As I warned readers on Tuesday, shorting a rally is one of the hardest ways to make money in the market, so this only applies to the most adventurous traders, but for the moment, this trade is working and we stick with it. The most important thing is respecting our stops. Just ask anyone who shorted “too high” at 4,400, 4,500, and 4,600. Don’t make the same mistake and pull the plug if the short trade stops working.

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Jan 02

What to do now that Santa left town

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slipped 0.6% on Tuesday after the good feelings surrounding last week’s Santa Clause rally left town.

Headlines haven’t changed in a meaningful way, but the calendar rolled over, and we find ourselves in a new year and a new quarter. All of the repositioning that took place in the final weeks of 2023 is done, and professional investors are starting with a clean slate. Gone is the pressure to chase prices into year-end, and now these institutional money managers are free to trade the positions they believe in, not what they think investors want to see on their year-end statements. And so far, it seems like big money doesn’t want to chase anymore.

One day doesn’t make a trend, but these are the early hints that changes could be blowing our way.

I was on vacation last week, and as a personal rule, I didn’t trade, but now that I’m back in the office, it’s game on. I’m not ready to jump on the short bandwagon after a few hours of weakness, but if this sticks around, I’m happy to start with a small short and a nearby stop.

As I’ve written before, shorting an uptrend is one of the hardest ways to make money trading because it requires impeccable timing. But if we approach it with a good risk management strategy, we can take a shot relatively safely.

The index bounced off of the afternoon lows in the final minutes of the session, so I didn’t pull the trigger on a short position yet, but I will be watching and ready to short continued weakness on Wednesday.

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Dec 20

The more things change, the more they stay the same

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Markets take the stairs up and the elevator down. That phenomenon was in full effect Wednesday when one afternoon of losses wiped out a week’s worth of gains.

Luckily, my regular readers saw this coming. As I wrote in my free analysis two days ago: 

The bulls won again on Monday, but that doesn’t mean smart money was chasing these overbought levels. In fact, smart traders are sitting on a big pile of profits they collected last week and are getting ready for the next big trade. Maybe that’s shorting the reversion trade later this week. Maybe that’s sitting in cash until something more interesting happens in January. Either way, anyone expecting these big gains to keep rolling in clearly doesn’t understand how markets work.

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These things are so predictable, yet every time we find ourselves in the middle of these situations, the average trader cannot help but think, “This time is different.” Well, as Wednesday afternoon proved, the more things change, the more they stay the same.

While I was one of the first in line to buy the November rebound when that kicked off last month, I will fully admit I didn’t anticipate the huge size of this rebound. I was willing to stick through last week’s 4,600 breakout, but late last week was getting a little too rich for my blood, and I couldn’t help but start collecting some very worthwhile 3x ETF profits.

I was fully aware I was collecting profits too early, but since no one can consistently pick tops, that means we are left choosing between selling too early and holding too long.

Wednesday afternoon’s price action shows why I prefer being in cash when the next trade lands. While everyone else was filled with dread watching their profits vanish, I was primed and ready to jump aboard short bandwagon and profit from slow money’s pain.

I fully admit I sold the rally too early, but on days like this, I don’t mind.

As for what happens next, these are rarely one-day events, and it could get bumpy before it gets better. If you are not using trailing stops to protect your profits, this is a good time to start.

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Dec 18

Why smart money was watching Monday’s rally from the sidelines

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 added a half percent Monday, on the first day of what will be a slow, holiday-affected week.

This will probably be the third slowest week of the year, following only Thanksgiving and next week between Christmas and New Year’s. For that reason, I don’t expect a lot of meaningful buying this week. Big money traders who wanted to buy ahead of year-end already bought. These managers have one foot out of the door and are not doing any serious work this week.

As I wrote during Thanksgiving, these holiday-affected sessions are vulnerable to elevated volatility as the retail traders and computers start doing wonky things without big money’s guiding hand.

At this point, I’m content watching this rally from the outside. Seven out of the last eight sessions ending in the green is a lot. The unfortunate thing for anyone buying these highs is the market has a habit of reverting to the mean. A stretch of down days to get us back to more normal levels wouldn’t surprise me at all.

Stocks move in waves, and bits of up are always followed by bits of down. Monday wasn’t that day. But it will be here soon enough, even if the selling does nothing but consign us to a sideways grind into January.

The bulls won again on Monday, but that doesn’t mean smart money was chasing these overbought levels. In fact, smart traders are sitting on a big pile of profits they collected last week and are getting ready for the next big trade. Maybe that’s shorting the reversion trade later this week. Maybe that’s sitting in cash until something more interesting happens in January. Either way, anyone expecting these big gains to keep rolling in clearly doesn’t understand how markets work.

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Dec 14

A warning for both bulls and bears

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Thursday was a choppy session for the S&P 500 as the index bounced between gains and losses before finishing in the middle of the day’s range, up a modest 0.3%.

Wednesday’s 1.4% pop was one of the biggest up days since the November rebound kicked off. But buyers were a lot more cautious Thursday as fear of heights kicked in.

I’m not ready to call this a top, but anyone buying at these levels is going to need a TON of things to go right for them to make good money on their trade.

Everyone knows stocks move in waves, and we have gotten a tremendous amount of up since the November lows. It is only a matter of time before we get the next inevitable down wave. But like I said, I’m not calling this a top. The only thing more foolish than buying here is shorting for no other reason than stocks are too high. Momentum is a powerful force; just ask anyone foolish enough to short 4,400, 4,500, or 4,600.

This will top and turn into a great short at some point, but it needs to top and start going down before we short it.

I locked in some fantastic 3x ETF profits Wednesday afternoon and Thursday morning. Now it is time to get ready for the next trade. I’m most excited about shorting a near-term pullback. But I’m just as happy to buy the next big short squeeze up to 4,800 if that’s what the market wants to do.

Smart traders wait for the market to reveal its hand before committing their money. That’s why I’m waiting patiently from the sidelines, sitting on a big pile of profits from my last trade.

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Dec 13

Everything is great…and that makes me nervous

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 surged 1.4% Wednesday after the Fed told investors inflation came down faster than expected, and they penciled in three rate cuts for next year. That wave of buying led to the biggest one-day gains since mid-November.

Bulls are cocky, bears are defeated, and I’m nervous. As I wrote readers on Tuesday, even though I long this market and making good money with 3x leverage, I was already moving toward the exits:

While the market looks good, this is the tipping point where we shift our mindset from offense to defense. I’m not expecting a lot of upside, meaning I plan on collecting profits relatively quickly. I’m not selling right now, but I already have my eyes on the exit.

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The market has done nothing but go straight up since early November. And Wednesday’s gains were some of the biggest of the entire move. That looks a lot more like a climax than the start of the next big rally.

I’m not one to call tops, but this feels very toppy. I’m not saying momentum can’t keep pushing us higher over the next few days and weeks, but this late in the move, nearly everyone who wanted to buy has already bought. That means there are far fewer buyers left to keep pushing prices higher.

I bought the 4,600 breakout last week using 3x leverage, and it’s been a great ride. But I recognize good enough when I see it, and these gains were great. That’s good enough for me, and I have started collecting partial profits Wednesday afternoon.

Without a doubt, I’m probably pulling the ripcord prematurely, but since I don’t pick tops, that means I’m left choosing between selling too early and holding too long. Since I’m in this to make money, I always pick selling too early because that leaves me in the best position possible to be ready for the next trading opportunity.

Maybe that means I buy back in later this week, next week, or next month when prices keep racing higher. Or maybe I short the inevitable step-back when it finally gets here. But no matter what happens next, I will be ready for it.

We only make money when we close our best trades, and there is no way I’m letting this big pile of 3x profits escape.

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Dec 12

Why I’m already standing near the exit

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 started Tuesday’s session in the red after the monthly inflation reading came in somewhat elevated at 3.1%. But it didn’t take long for buyers to show up and push the index into the green. By the close, the S&P 500 added another 0.5%, and the slow-motion breakout above 4,600 resistance continues.

Weak opens and strong closes are typical of bull markets. We consumed a whole lot of upside getting to these levels, meaning slower times are ahead. It is hard to get excited about these small gains, but as long as we keep getting more up than down, there is only one way to trade this.

The Santa Clause rally arrived early this year, and stocks are slowly drifting higher this week. No one is getting rich from these few tenth-of-a-percent rallies, but when you add them up, they turn into real money. I’m not expecting a big short squeeze from this 4,600 breakout, but there are enough shorts getting squeezed to give us this near-term lift. As slow and boring as this feels, the slower it goes, the more sustainable it is.

While the market looks good, this is the tipping point where we shift our mindset from offense to defense. I’m not expecting a lot of upside, meaning I plan on collecting profits relatively quickly. I’m not selling right now, but I already have my eyes on the exit.

My stops have already been lifted to my entry points, turning this into a low-risk trade. I’m not ready to pull the rip cord just yet, but that day is coming. If we continue with a string of up days, I will start collecting some partial profits in the back half of the week.

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Dec 11

Why the bulls keep winning

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Monday’s session 0.4% higher, putting even more distance between the index and prior resistance at 4,600.

Lucky for readers, Monday’s gains were expected. As I wrote in last Friday’s post titled, “Bears Have Been Warned”:

The index is not going anywhere fast, but more up than down means there is only one way to trade this. Lift stops above recent lows, and see where this takes us.

We finally broke resistance, and these things usually go a bit before stopping. Keep expectations in check, but stick with what is working.

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The economy continues down the “just right” path. Not hot enough to keep inflation elevated and not weak enough to threaten employment and push us into a recession.

How much longer this “just right” lasts is anyone’s guess, but savvy traders focus on what the market is doing, not what could happen. At this point, 4,600 resistance is no longer a barrier. In fact, resistance often turns into support, so Monday’s confirmation further boosts the bull’s case.

The explosiveness in this move was used up weeks ago, meaning we are left with this slow grind higher. There is nothing wrong with that. We are stuck with what the market gives us. If we want to make money, this is how we do it. And making money sure beats what the bears are doing right now…

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Dec 08

Bears have been warned

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 closed above 4,600 resistance on Friday for the first time in over a year and a half.

Bears fighting “too high, too fast” keep giving away money, but this doesn’t surprise readers. As I wrote on Thursday:

Something that refuses to go down will eventually go up. At this point, bears are losing the argument, and it will likely get worse for them if they continue fighting this market. If the November rebound was going to fail, it would have happened by now.

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The index is not going anywhere fast, but more up than down means there is only one way to trade this. Lift stops above recent lows, and see where this takes us.

We finally broke resistance, and these things usually go a bit before stopping. Keep expectations in check, but stick with what is working.

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Dec 07

Why bears are losing the argument

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 added 0.8% Thursday after Wednesday’s bearish intraday reversal turned into a lot of nothing.

One day’s down becomes the next day’s up, and so far, the market doesn’t seem interested in doing anything meaningful. November gave us a huge rebound; now it is time to rest.

That said, holding all of the recent gains confirms these levels are real and the index is not teetering on the edge of a collapse. If stocks were fragile and overbought, one of these waves of selling would have kept going. Instead, most owners shrugged and kept holding.

Stocks don’t have the strength to keep charging higher, but the longer we hold these levels, the more real they become. Something that refuses to go down will eventually go up. At this point, bears are losing the argument, and it will likely get worse for them if they continue fighting this market. If the November rebound was going to fail, it would have happened by now.

Bigger trading opportunities are coming our way, but it will take time. Stay patient and resist the temptation to overreact to this intraday chop.

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Dec 05

Why smart money is sitting on their hands

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 finished Tuesday’s session essentially flat as Monday’s wave of selling turned into a lot of nothing.

As I wrote Monday evening, the market is consolidating November’s gains under 4,600 resistance. This makes recent price action meaningless at best, and outright deceptive at worst:

Far and away, the hardest thing to do in the market is to not trade. We have opinions, and the market is always doing something, but at this stage, every trading signal fizzles and reverses hours later. Just ask all of the bulls that bought Friday’s strength, only to watch those profits turn into losses Monday morning.

This is a consolidating market, meaning we can’t read anything into these intraday gyrations. Something will happen, but this isn’t it. Keep waiting and watching.

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This market is an equal opportunity humiliator, zinging both the bulls and the bears. Optimists who bought Friday’s pop are sitting on losses, and now we can add cynics who aggressively sold Tuesday’s poor open. More interesting trading opportunities are coming, but these are not them.

At this point, it is a tossup between stalling under 4,600 resistance or resting before the next leg is higher. This remains a sentiment trade, meaning anything is possible. The best we can do is wait for the market to reveal its intentions. Until then, smart money is sitting on their hands.

I’d love to be making money right now, but it’s been a fantastic year of trading, and there is no reason to force a bad trade here for nothing more than the impulsive need to be trading. Better opportunities are coming. We just have to be patient.

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Dec 04

Why Monday’s selling doesn’t mean anything: Part II

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slipped 0.5% Monday as the index continued consolidating November’s big rebound under 4,600 resistance.

The market has been stalled for a couple of weeks, but this was expected. As I wrote early last week:

Calm markets are bullish, and the path of least resistance remains higher, but I’m not excited to hold all of the risk underneath us for another few points of upside. That means I will keep watching this develop from the sidelines after collecting big profits before the Thanksgiving break. But if this strength persists and we are setting up for another pop through in overhead resistance, I will be happy to jump back in. But we’re not there yet.

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Well, here we are a week later, and not much has changed.

Far and away, the hardest thing to do in the market is to not trade. We have opinions, and the market is always doing something, but at this stage, every trading signal fizzles and reverses hours later. Just ask all of the bulls that bought Friday’s strength, only to watch those profits turn into losses Monday morning.

This is a consolidating market, meaning we can’t read anything into these intraday gyrations. Something will happen, but this isn’t it. Keep waiting and watching.

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Nov 27

Why Monday’s price action doesn’t mean anything

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slipped 0.2% on this first Monday back from the Thanksgiving-affected week.

Not much is going on in the financial press, and a little give-back following last week’s modest 1% gains is not a surprise. Big money was not involved last week, and institutional investors often undo what the little guys did when they were on vacation.

The first few sessions after a major holiday are usually slow, and I’m not expecting anything interesting before the second half of the week…at the earliest.

That said, it is constructive to see the index hold the majority of recent gains. If this market skating were on thin ice, Monday’s selling would have accelerated, not stalled after a fairly inconsequential loss.

At this point, most owners are comfortable holding for higher prices, and the resulting tight supply is keeping a floor under the market. The longer we go without retreating, the more real these prices become. (But as always, we can’t take anything for granted, and the next wave of fearful selling is never more than one bad headline away.)

The market is behaving well near 4,600 resistance, and acting like it wants to test this level before doing anything else.

Calm markets are bullish, and the path of least resistance remains higher, but I’m not excited to hold all of the risk underneath us for another 20-40 points of upside. That means I will keep watching this develop from the sidelines after collecting big profits before the Thanksgiving break. But if this strength persists and we are setting up for another pop through in overhead resistance, I will be happy to jump back in. But we’re not there yet.

Smashing through 4,600 resistance or getting rejected by this level, it doesn’t matter what the market does next as long as it does something. We will learn a lot about the market’s mood in the second half of this week.

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Nov 16

Why smart money is skipping next week

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Tuesday’s session up a tenth of a percent as it continues to digest the huge rebound from the October lows.

Stocks fall quickly from overbought and unsustainable levels. While holding gains for two sessions is not conclusive, it demonstrates there is some support for these prices. And the longer we stay here, the more real they become.

That said, as good as the market looks, I’m not one to look a gift horse in the mouth. The market gave me huge profits over the last three weeks, and I won’t allow myself to get greedy by asking for even more. As I wrote Wednesday evening, I locked in some really nice profits:

I’m not calling this a top and the index’s momentum could easily push us higher for a few more days, but common sense tells us the rewards above our heads are far smaller than the risks underneath us.

This has been a great trade, but all good things come to an end. We only make money when we sell our best trades, and this is the time to be collecting some very well-earned profits.

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Next week is Thanksgiving, and most big money managers will be on vacation, so we shouldn’t expect a lot of buying. The junior associates manning the desks don’t have the authority to initiate new positions, so it should be a quiet week.

That said, without big money’s guiding hand, that does give emotional retail traders more influence. Lucky for us, these impulsive traders have small accounts and can’t drive the market very far, but they can inject some volatility if they get whipped up into a frenzy.

Limited upside and elevated risks for increased volatility mean this is a great time to watch from the sidelines. Spend next week with friends and family, not obsessing over whether ten points up or down is the start of the next big move. There will be plenty of trading opportunities in the final weeks of the year. Enjoy our recent run of good luck and take some time off.

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Nov 15

All good things must come to an end

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 added another 0.2% Wednesday, making this 11th winning session out of the last 13.

Not bad, considering sentiment was in the toilet three weeks ago after the index fell into correction territory (-10%). Yet, here we are, a handful of sessions later, within 2% of 52-week highs. Funny how that works.

Luckily, loyal readers were well-positioned for this whipsaw. As I wrote in my free analysis three weeks ago when this 400-point rebound was only one day old:

I have no idea if Monday’s bounce will stick, but it was a good start, and that’s all I needed to put on a partial position. Start small, get in early, keep a nearby stop, and only add to a trade that’s working.

If the index retreats on Tuesday, I will pull the plug for a small loss and try again next time. If the rebound keeps going, I will add more and lift my initial stops to near my entry points, greatly reducing my risk.

As I frequently remind readers, buying bounces is hard because two-thirds of them fail. But if we limit our losses on the false starts by entering with partial positions and keeping stops nearby, riding a winner higher with a full position will more than offset any previous losses.

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I will be the first to admit I didn’t see a 400-point rebound coming, but we must be standing in the right place at the right time before we can get lucky. And that’s exactly what happened. I didn’t know how far and fast this rebound would run, but I knew a bounce was coming, and I grabbed hold.

But 400 points later, it is hard to be excited by the diminishing rewards left ahead of us versus the growing risks looming underneath us. Everyone knows stocks move in waves, and just as obvious as it was that a bounce was coming our way three weeks ago, it is equally obvious that this rate of gains cannot keep going.

Now, to be clear, I’m not calling this a top and the index’s momentum could easily push us higher for a few more days, but common sense tells us the rewards above our heads are far smaller than the risks underneath us.

This has been a great trade, but all good things come to an end. We only make money when we sell our best trades, and this is the time to be collecting some very well-earned profits.

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Nov 14

Too much of a good thing makes me nervous

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 popped 1.9% Tuesday after the monthly inflation report continued moderating and is now at levels that make future Fed rate hikes unlikely.

As has been the case over the last twelve months, this continues to be a less-bad-than-feared market. Whether it is uncontrollable inflation or Fed rate hikes strangling the economy, reality has turned out far less bad than doom-sayers have been claiming.

The stock market still faces plenty of economic risks and uncertainty, but at this point, the bulls have been far more right about our economic trajectory than the bears.

Lucky for readers, we were positioned well for Tuesday’s latest run-up in prices. As I wrote Monday evening:

Last Friday’s rebound was buyable, and we could add more Monday with stops already lifted up near Monday’s lows. I don’t see a big pile of near-term upside ahead of us, but when we can enter a trade in a low-risk way, we don’t need a lot of profit potential to make it a trade worth making.

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Without a doubt, I underestimated the big wave of buying that would wash over us less than 24 hours later, but it definitely pays well to be caught on the right side of this trade.

But now that stocks are 400 points above recent lows and within 2% of 52-week highs, this is the time to be getting defensive, not greedy. We’ve been right in a huge way, but that only matters if we are willing to lock in worthwhile profits when we have them.

We don’t need to totally abandon a trade that’s working this well, but we need to be spending far more time thinking about protecting these profits. That means lifting stops and even considering locking in some profits proactively.

Remember, no one can consistently pick tops, so don’t try. That leaves us with two choices: selling too early or holding too long. I prefer selling too early because cash is the best place to be when the next trading opportunity comes knocking. Anyone who holds too long risks giving everything away. Just ask all of the bears that were boasting about their profits two weeks ago. Bears that collected profits early are sitting pretty, while bears that held too long watched a great trade turn into a painful loss.

Stocks move in waves, and as good as this rebound looks, that’s exactly what makes me nervous. We don’t need to sell everything, but lift trailing stops to protect the majority of our profits and consider locking in some partial profits proactively. It is amazing how much easier it is to ride the next wave when we have a pile of profits in our pockets and a lot less exposure to the next wave of selling.

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Nov 13

Don’t fight a trade that’s working

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Monday’s session down a modest 0.1%. More importantly, the index held on to 4,400 after breaking through this key resistance level last Friday.

Economic headlines haven’t changed in a meaningful way in months. Bears are just as bearish as they were last week, last month, and last year. The difference is we ran out of fearful sellers two weeks ago, and stocks popped decisively after supply dried up.

While 5% in one week is a tremendous amount, at this point, the market keeps acting like it wants to go even higher. No one should expect another 5% run over a few sessions, but given Thursday’s and Monday’s failed selloffs, the market is telling us the path of least resistance remains higher.

As I wrote early last week:

Hold near 4,400 resistance for a few more days, and these levels will feel less risky. That’s when some of those left behind last week will find the courage to start buying.

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Holding recent gains was the first step to breaking through 4,400 resistance, and that’s exactly how it played out over the last two sessions.

Of course, the easy gains are behind us, and there will be a lot more back-and-forth going forward, but only fools are fighting this market right now.

Last Friday’s rebound was buyable, and we could add more Monday with stops already lifted up near Monday’s lows. I don’t see a big pile of near-term upside ahead of us, but when we can enter a trade in a low-risk way, we don’t need a lot of profit potential to make it a trade worth making.

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Nov 07

Why smart money is already collecting profits

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Tuesday up a respectable 0.4% as the widely expected pullback from last week’s unsustainable rebound failed to materialize.

Traders have a natural fear of heights, and that causes buying to dry up after big runs like we saw last week. But demand is only half of the equation. At this point, owners are feeling confident and few are interested in selling this big rebound, keeping supply tight and propping up prices.

This inevitable tapering of buying was obvious and is why I was collecting profits late last week. As I wrote last Thursday evening:

To be clear, I’m not calling this a top, but with a big pile of profits in hand, it would be criminal to allow hubris to turn these profits into losses. Remember, we only make money when we sell our best trades. Nearly 200 points in a 3x ETF is good enough for me. At this point, the rewards ahead of us are far smaller than the risks underneath us.

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Hold near 4,400 resistance for a few more days, and these levels will feel less risky. That’s when some of those left behind last week will find the courage to start buying. Until then, prices will likely remain stalled under 4,400 resistance. (Unless the market starts putting the screws to the bears again, and they are forced to cover again at rapidly rising prices, but this is a less likely outcome.)

I like the market here, but the upside is not big enough to justify the risks underneath us. Give it a few more days, and the risk/reward starts to shift in the other direction. But until then, this is a better time to be more cautious than aggressive.

I collected profits, and I have zero regrets, even if Tuesday’s close is a few points above where I sold. Holding a big move too long risks giving it all back, and it would be criminal to allow greed to let last week’s profits escape.

Momentum definitely favors higher prices over the near to medium term, but the incremental rewards of holding for a few more days are nowhere near big enough to justify the risks.

We only make money when we sell our best trades, and for me, that was peeling off very worthwhile profits late last week. Another trade is coming, but I’m comfortable watching the consolidation of last week’s gains from the sidelines.

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Nov 02

I don’t mind being called a fool when it leads to profits like this

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 popped another 1.9% Thursday, making this four up-days in a row.

The Fed did exactly what everyone expected on Wednesday, meaning the Fed’s decision didn’t change anyone’s mind. Those that were bearish on Tuesday were still bearish on Thursday. What changed is the market ran out of impulsive sellers last Friday. The resulting oversold condition triggered this capitulation and 200-point rebound over four short trading sessions.

Easy come, easy go, as my dad loved to remind me when I was young.

There are two ways to trade: starting like a fool and ending like a genius, or starting like a genius and ending like a fool.

Without a doubt, I looked foolish last week when I told readers I was getting ready to buy last week’s blood bath as soon as it bounced. Here’s what I wrote in last Wednesday’s free post (Oct 25th):

Remember, stocks top when everything looks great, and they bottom when everything looks terrible. By that measure, this is definitely a good time to be bottom-fishing. To be clear, I am 100% opposed to buying on the way down. But every time we bounce, you will find me jumping in. Start small, get in early, keep a nearby stop, and only add to a position that’s working. Follow those simple rules, and bottom-fishing is extremely profitable.

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There were a lot of greedy bears gleefully criticizing my optimism last week. And without a doubt, they were right initially. But here we are a few days later, and the market has turned all of their profits into big piles of losses.

Luckily, I have no problem playing the fool in front of the crowd if it lets me rack up a pile of 3x ETF profits like this a handful of sessions later.

Of course, I’m not going to let myself fall into the same trap greedy bears were caught by. I am fully cognizant that markets move in waves, and one week’s genius becomes the next week’s fool. Thursday’s nearly 2% up day was the biggest gain of this rebound, and these things usually accelerate right before the end.

To be clear, I’m not calling this a top, but with a big pile of profits in hand, it would be criminal to allow hubris to turn these profits into losses. Remember, we only make money when we sell our best trades. And at this point, nearly 200 points in a 3x ETF is good enough for me. At this point, the rewards ahead of us are far smaller than the risks underneath us.

But now that I’m out of the market and sitting on a huge pile of profits, the very first thing I do is start looking for that next opportunity to get back in. Maybe that is buying the next dip and bounce. Maybe it is buying a huge short squeeze that powers through the 50dma. No matter what it is, I will be ready for it.

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Nov 01

Why this is the wrong time to be patting myself on the back

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 popped another 1% Wednesday, making this three up days in a row.

While this still has a long way to go before getting back even half of the previous eight sessions of losses, three days of gains is a good start.

Lucky for me, this is the trade I was waiting for. As I wrote Tuesday evening:

I still have no idea how long this rebound will stick around, but now that prices are comfortably above my entry points, I lifted my stops to my purchase prices, making this nearly a risk-free trade. If the index retreats on Wednesday, I get out near breakeven. If the rebound continues, I will let those profits keep rolling in. These low-risk/high-reward trades are what I dream of.

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The Fed gave us another interest rate decision Wednesday afternoon, and as expected, they kept rates unchanged. More interesting is how little the market reacted to the news. Investors have correctly anticipated every Fed rate move this year, but that hasn’t stopped traders from overreacting to every announcement. So, it was actually refreshing to see the market maintain its composure this time. A calm market is a bullish market.

As for my 3x ETF trade that bought this bounce, this is passing the tipping point between offense and defense. While it is tempting to pat myself on the back for spotting a good trade, these gains actually make me nervous. That’s because I know markets move in waves, and all good things come to an end.

The index broke through 4,200 support/resistance and now rests just under the 200dma. It wouldn’t surprise me to see this rebound run into some headwinds. That would be the normal and healthy thing to do, and I’m comfortable holding a measured and methodical rebound. Less sustainable is triggering a powerful short squeeze, and that is what would cause me to punch out and collect profits over the next few sessions.

But no matter what happens, I’m already making a plan to collect my profits. In my book, selling too early always beats holding too long. Remember, we are only in this to make money, and we only make money when we sell our favorite trades.

Keep holding, but lift stops to guarantee some of these profits, and wait to see what Thursday brings.

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