End of Day Analysis Archives - Page 22 of 56

Apr 07

Why I like boring markets and what’s up with $TSLA?

Free After-Hours Analysis:

Wednesday was another quiet session for the S&P 500 following last week’s 4k breakout.

While most traders are addicted to drama, boring is vastly underrated. Emotional markets produce big moves, unfortunately, most of the time the big action occurs in the wrong direction. On the other hand, boring markets make far smaller moves, but most of them line up in the positive direction. And lucky for bulls, we are in the middle of a very boring market.

Headlines remain benign and stocks continue rallying on “less bad than feared”. Until something changes, stick with what has been working. Hold for higher prices and keep lifting our trailing stops.

The index finished with a small gain but someone forgot to tell TSLA. The electric car maker lost 3% in an otherwise decent day for leading growth stocks.

While we don’t want to overreact to a single day of underperformance, we need to see TSLA lead this market higher, not lag behind it.

Last week’s nice bounce off of $600 support was buyable, but if this underperformance continues, we need to pull the plug and lock-in profits while we still have them. (And if this retreats under $600, that becomes an attractive short entry.)

I’m not giving up on this stock just yet, but I have it on a short leash.

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Apr 06

Why the index keeps going higher and the next buy point for $GME

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 finished Tuesday mostly flat (-0.1%) after spending all day bouncing between small gains and losses. But flat after adding nearly 120-points over the previous three sessions is actually quite constructive.

Everyone knows stocks cannot go up every day, so pinning our hopes on a fourth, fifth, or sixth strong day is unreasonable. But holding all of last week’s 4k breakout and most of yesterday’s strong follow-on gains tells us investors are not rejecting this latest push to all-time highs. Confident owners continue holding for higher prices and few are interested in taking profits at these record-high prices.

No matter what the cynics claim about complacency, as long as confident owners keep holding for higher prices, supply remains tight and it is easy for stocks to keep rallying. As the saying goes, what is high tends to get even higher.

This bull market will fall like all of the others that came before it, but this is not that time. Stick with what has been working and that is holding for higher prices and moving up our trailing stops.

GME is a buy above $200 but it is struggling to close the deal and it cannot get above this key resistance level. Fail to deliver on this obvious breakout and this starts looking more like stalling than resting and we need to be extremely careful.

This is a perfect example of why we must wait for confirmation before jumping in. Sometimes close isn’t good enough and this is one of those instances where it is safer to be a little late than a lot early.

Wait for the $200 breakout and we can buy the bounce for a quick trade, but only after this gets above $200.

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Apr 05

Why stocks don’t care about the risks and the best FAANG stocks to own

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 exploded higher Monday morning following last week’s breakout through the psychologically significant 4k level. But this isn’t a surprise, as I wrote last week:

Never bet against a market that keeps making new highs. Until we start getting a series of lower-highs and lower-lows, this bull market is alive and well and there is only one way to trade this.

Most of the things cautious investors worry about are still hanging over us (Covid, rising interest rates, elevated unemployment, sky-high stock valuations, etc), but the stock market is no longer bothered by these things. But this is normal as headlines eventually become priced in.

Nervous owners that fear these headlines sell to confident dip buyers who don’t mind the risks. After enough time passes, we exhaust the supply of fearful sellers and prices resume their climb. That’s exactly what happened here. The environment is not great, but we have definitely avoided the worst-case scenarios and less-bad is all we need to keep the rally going.

From a trading perspective, there is nothing to do other than stick with what has been working. I’m holding for higher prices and lifting my stops, now spread across the 3,900s.

We can argue with the market or we can profit from it. I choose profit every single time.

No doubt something will come along and rain on this parade (because it always does), but until we see a series of lower-highs and lower-lows, there is only one way to trade this.

The FAANG stocks finally turned it on are helping propel the indexes to these record highs. FB is back making record highs while GOOGL was already near all-time highs and keeps adding to them.

AMZN, AAPL, and NFLX are a little further back, but that is actually a good thing for us because that means these stocks have more profit potential during their recovery.

I really like FG and GOOGL, but right now, AMZN, AAPL, and NFLX are even more attractive.

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Apr 01

After 4k, is it finally time for a contrarian trade, and are the FAANG stocks back?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 surged to record highs and closed 20 points above the psychologically significant 4k level. It’s taken a few weeks, but we finally did it.

Wall Street brokers are already handing out the 4k hats. While that sounds like the perfect invitation to make a contrarian bet, only fools trade against something for no other reason than it looks “too high”. Before giving up on this bull market, we need a concrete and compelling reason to stop going along with this strength.

Without a doubt, this 4k breakout could be the beginning of the end, but the very first thing that needs to happen is for prices to stall and retreat. The very most important part of that sentence was “retreat”. Until stocks actually retreat from these levels, there is nothing to do but keep holding for higher prices.

A lot of people got out prematurely at 3,600, 3,700, 3,800, 3,900 and now 4k because stocks are “too high!” The thing these people forgot is “too high” often ends up going even higher.

Never bet against a market that keeps making new highs. Until we start getting a series of lower-highs and lower-lows, this bull market is alive and well and there is only one way to trade this.

The S&P 500 broke through 4k and the FAANG stocks came back to life! It’s hard to say who is leading who, but the most important thing is both are finally working together. As long as the FAANG stocks keep this newfound strength, expect the indexes to continue pushing higher.

Of the group, FB and GOOGL are clearly the best and either at highs or very close to them. That said, the FAANG laggards often catch up and that means we shouldn’t give up on AAPL, NFLX, and AMZN. In fact, there is more upside in betting on these catching up than chasing FB and GOOGL near the highs.

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Mar 31

Another good day for $SPX and a buy signal from $TSLA

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

After spending most of Wednesday at record levels, the S&P 500 pulled back modestly at the end of the day and just missed a record close by a measly 2 points. Close, but no cigar.

While it is never helpful to see a stumble into the close following a push to fresh highs, the market deserves a pass this time. Wednesday was the final day of the first quarter and some institutional investors move things around for housekeeping and reporting purposes. This window dressing isn’t significant and doesn’t mean anything. I won’t give this late fizzle a second thought as long as the selling doesn’t continue Thursday.

At this point, the market is in good shape and passing through 4k seems inevitable, if for no other reason than the market tends to go where everyone is looking.

It’s taken the market nearly two months to go from 3,900 to 4k. That’s a very reasonable amount of time and cooled off some of our previous “overbought” conditions. Sometimes markets rest by pulling back, other times they rest by trading sideways.

This sideways consolidation hasn’t been long enough to support a dramatic rally, but we are on pace for a continued grind higher. As long as we keep getting more up than down, everything is going according to plan.

TSLA has done a really nice job bouncing off of $600 support. As I wrote on Friday:

$600 is our line in the sand. Above support and TSLA is buyable. Under support and it becomes shortable. It doesn’t get any more straightforward than that.

If anyone was fortunate enough to be reading this blog back in February and locked in some nice profits near $800, this is a good place to be adding some of that money back. Place a stop under $600 and see where this bounce goes.

That said, be wary of any retreat back under $600, especially so quickly after bouncing off of support. If dip buyers don’t show up and this falls under $600 over the next few days or weeks, that shows demand is a problem and lower prices are ahead. And the scary thing is there is a lot of clear air between $600 and $400 support.

But that is simply a contingency. As long as TSLA remains above $600, all lights are green.

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Mar 30

Why the S&P 500 is headed higher and $GME is worth a second look

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

On Tuesday the S&P 500 slipped for the second day in a row following Friday’s record close. That said, these two losses only added up to 0.4% and the index remains within easy reach of the psychologically significant 4k milestone.

The 10-year Treasury yield pushed up to another post-covid high. But as alarmed as equity investors were when this yield rally took off earlier this year, this latest round of increases are largely being met with a yawn. But this isn’t a surprise. We’ve been living under the clouds of higher interest rates for a couple of months and if they were going to kill this bull market, it would have happened by now. Instead, most stock owners remain confident and are holding for higher prices.

A popular stock market truism warns us of complacency. While complacency often proceeds the fall, the thing most people forget to mention is just how long compliance lasts before the fall. Markets can stay complacent for many months, even years. That means anyone trading the early signs of compliancy is getting out long before they should. While these cynics will eventually be right, they will be wrong for a long, long time before that happens.

Weak markets don’t keep making record highs. That means this market is strong, not weak. Until we have compelling evidence to the contrary, continue giving this bull market the benefit of doubt. Hold for higher prices with stops spread around 3,900.

While the charade in GME will eventually come crashing back to earth, there are no limits to what fools and their money can accomplish when they pool their resources. While GME is headed back to $20 over the medium term, the near-term upside looks interesting. As obvious as the inevitable collapse is, we have to take note of just how stubbornly the stock is holding near $200.

One of the most powerful signals in the stock market is when something is not doing what everyone thinks it should be doing. In this case, the obviously overvalued GME should be tumbling back to $20. The fact we are still holding near $200 tells me there is still a lot of demand at this level and the stock wants to take another run higher.

This might be the last gasps of a dying stock, but if this gets above $200, it is buyable for a (very) quick trade. If you get a 20% or 50% pop, take your money and run because those profits will likely be gone hours later.

And once this near-term pop fizzles and retreats back under $200, this becomes a great short entry point.

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Mar 29

An imminent milestone for the S&P 500 and a warning for $ZM owners

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Monday started with a modest wave of selling as the S&P 500 digested weekend headlines of a major institutional investor blowing up and unfilled margin calls leaving several banks with massive write-downs.

Experienced traders are taking note because similar episodes triggered a cascade of falling dominos sent the indexes into a bear market. But so far, this story seems contained and hasn’t spread beyond a few directly affected stocks.

At least for the moment, the market is treating this as an isolated incident and Monday morning’s dip was shallow and fleeting.

The afternoon rebound reversed all of the early selling and left us a small fraction shy of all-time highs. As much as the cynics rant about complacency, vulnerable markets don’t keep making higher-highs. The thing the critics forget is just how long complacency lasts before the fall.

At this point, we are only a handful of points from the psychologically significant 4k level. It’s taken us a couple of months to go from 3,900 to challenging 4k, but it looks like the breakout is finally coming. After two months of resting and consolidating, the market is ready to go.

I’ve been ragging on ZM for months and unfortunately, the situation isn’t getting better. After a brief bounce above $400 support last month, the stock retreated back to recent lows and is poised to start making fresh lower-lows. This remains a short under $400 and for anyone still holding ZM, it is about to get worse.

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Mar 25

Is the $SPX dip already over and what should we do with $TSLA at $600?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Thursday gave us another rough start for the S&P 500 and the index easily undercut last week’s lows. But rather than trigger a follow-on wave of defensive selling, supply dried up and prices bounced back above 3,900 support before the close.

Sometimes things appear the most hopeless moments before turning around. Between violating 3,900 support in a poor finish Wednesday afternoon, gapping even lower Thursday morning, undercutting last week’s lows, and crashing through the 50dma, everything lined up for a free-fall. And that’s exactly when the market found a bottom and bounced.

We could dissect employment reports, Fed comments, and Congressional testimony, but in the end, the only thing that matters is how the market reacts and it actually took all of these developments in stride. Rather than devolve into a herd of panicked sellers, confident owners shrugged and kept holding.

Thursday’s dip and bounce wasn’t dramatic enough to qualify as real capitulation, but it was good enough to confirm most owners still don’t want to sell. As long as they continue holding for higher prices, dips will remain shallow and quick.

Following a similar theme, TSLA slumped back to $600 support before catching a bid and finishing the day closer to the mid-$600s.

So far so good. TSLA remains ownable above $600 support and we can keep holding. But if prices retreat and fall under $600 support, this turns into an attractive shorting opportunity.

With such a powerful momentum stock like TSLA, there is only hot or cold. Either we are riding a wave higher or we are getting out of the way. A violation of $600 support means there is more pain ahead and we should do our best to avoid getting pulled down in another wave lower.

It is okay for a person to be both bullish on the stock and also defensively locking in profits when prices retreat past our trailing stops.

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Mar 24

A strategy to protect $SPX profits and beating the $GME horse

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Wednesday was another rocky session for the S&P 500 and the index lost half a percent. That makes four down days out of the last five sessions.

Interest rate headlines continue dominating the financial press. That said, the reactionary selling has been relatively constrained and the index is only marginally below last week’s record highs.

The thing to remember about stock market crashes is they are breathtakingly quick. In comparison, we’ve been dealing with bond yield headlines all month, yet here we are within 2% of all-time highs. That hardly qualifies as panic selling.

But while the rally still appears to be in good shape, we always need to have our line in the sand. While this dip will most likely bounce like all of the other dips that came before it, there are no guarantees in the market.

The greatest advantage we have as independent traders is the nimbleness of our size. There is no reason to hold a position all the way down given how effortless it is for us to sell and buy back in.

While picking stops is never easy, spreading stops across a range helps minimize indecision and second-guessing. Pick a high point, a low point, and something in between. This way you are locking in some profits quickly and you are giving other positions a little extra room to avoid a routine shakeout.

If prices bounce quickly, only a small portion of your position was shaken out. If prices fall further, you got out at higher levels and can actually take advantage of buying the bigger discounts.

The most important thing is as soon as you get dumped out, start looking for the next buying opportunity to get back in. Many times the pullback proves to be a false alarm and the bounce can be within days if not hours.

While riding through whipsaws is annoying, I’d much rather deal with that minor inconvenience than suffer a large loss by stubbornly holding a larger dip that doesn’t bounce.

It was another brutal session for GME. The stock lost 1/3 of its value and odds are it will never get back above $200 ever again.

As much as the cheerleaders are willing this to go higher, it seems everyone who wants to pay $200 for a $20 stock has already bought it and there are no other fools left to keep pushing prices higher.

Volatility will remain off the chart for a while but expect every dip make a lower-low and every bounce to make a lower-high.

If a person didn’t sell this latest echo, they have no one to blame but themselves and their greedy impulses.

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Mar 23

Tales of a stubborn bull market and a warning for $GME owners

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 lost 0.8% Tuesday in the second-largest give-back over the last few weeks. Yet even when combined with last week’s -1.5% down day, the index remains within 1.6% of its all-time closing high. Hardly bearish material.

That said, you have to give the bears credit for their persistence. But so far they have been unable to crack this resilient bull market. No matter what is thrown at this rally, it just keeps shrugging off the bad news. While the cynics have been wrong 100 times up to this point, they insist this time they are finally right. Could they be right? Sure. But will they be right? No, probably not.

Successful trading is a game of probabilities and right now odds favor a continuation. This is a stubbornly resilient market and rather than fight the stubborn strength, we should be going along for the ride.

I’d love it if this market cracked wide open and panicked sellers started giving away stocks at huge discounts. Unfortunately, I don’t see that happening. We need to get cautious if Tuesday’s dip continues under Friday’s intraday lows. But until then, stick with what has been working, which is holding for higher prices.

GME reported earnings after the close and they missed pretty big on both the top and bottom lines. That didn’t stop after-hours traders from bidding up the stock right after the earnings release. Unfortunately, that initial strength was short-lived and the stock ultimately closed down 15% by the end of the after-hours session.

I’ve been skeptical of the sustainability of this latest “echo” and it seems the bounce’s momentum is quickly petering out. As I’ve been telling Premium subscribers for over a week, once this thing falls under $200, it ain’t coming back. There are only so many fools willing to pay $200 for a $20 stock and it looks like we finally ran out of them.

This was a momentum trade and now that the momentum’s gone, there is no reason to own this. Hopefully, regretful buyers from the first runup were able to get their money back during this impressive echo. But if they didn’t, they have no one to blame but themselves.

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Mar 22

Why the $SPX’s bull market isn’t dead yet and a trading plan for $TSLA

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The week started well for the S&P 500 as it continued Friday’s bounce off of 3,900 support. Treasury yields moderated modestly and slipped under 1.7%. While not a big pullback, the decrease was enough to put stock traders in a dip-buying mood and the index is back within 1% of last week’s record close.

While the stock market is trading well and this resilience would be a big green light to start buying more under more conventional circumstances, I have a lot less confidence the worst is over in the bond market. In fact, I fully expect Treasuries to challenge 2% over the next few weeks.

Bond investors are human beings and prone to the same emotional mood swings as stock investors. That means these large moves tend to go way too far before eventually moderating. And in this instance, 2% seems to be the next target.

But as long as that move to 2% is relatively measured and turns into capitulation before retreating back to a more manageable 1.5%, this rise in yields shouldn’t threaten the bull market. Instead, this will simply be another bump on the stock market’s way higher.

That said, all bets are off if the bond selling intensifies and yields shoot past 2% and keep going. That’s the worst-case scenario. And as is usually the case with the worst-case scenario, the likelihood is of this outcome is slim. Most of the time reality turns out less-bad than feared. But that doesn’t mean equity investors won’t overreact to the risks over the near-term.

I really like the way the S&P 500 bounced off of 3,900 support and this move is buyable as long as the index remains above 3,900. Tumble under 3,900 on Tuesday and we need to pull the plug and reevaluate.

TSLA is struggling to add to March’s bounce off of $600 support and the rebound appears stalled under $700. The bounce is still holdable with a stop near $600, but if prices fall under $600, get out and even consider shorting the weakness. If $600 support doesn’t hold, the next obvious support level is $400. IMO, there is no reason to sit through a 33% pullback if we don’t have to. And if the stock bounces back above $600, it is easy enough to buy back in.

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Mar 11

Why bears got the interest rate trade wrong and what’s coming up for TSLA

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Thursday was a good day for the S&P 500 with the index notching yet another record close. That’s miles from last week’s apprehension over the looming stock market collapse.

It’s been a few weeks since the last record high, but more important is this rebound extends the trend of higher-highs. As much as the cynics try to bash this market, fragile markets don’t keep making new highs. That confirms this a strong market, not a weak one.

The other nice thing to see Thursday was was a modest decoupling between bonds and stocks. Previously, stocks were rising and falling at the mercy of the bond market’s whims. Thursday, the bond market was mostly flat while stocks staged this nice rally to record highs.

But this shouldn’t be a surprise. As I wrote last week, stock investors are not afraid of these historically low 1.5% interest rates. They were worried this surge would continue to 3% and beyond. But so far, yields are settling in around a very reasonable 1.5% and that level seems good enough for the equity market.

Every pullback feels real. By rule, it has to. That’s because if it didn’t feel real, no one would sell and prices wouldn’t drop. Buying last week’s bounce was hard, but so far it looks to be the right call.

The thing to remember is risk is a function of height. The higher we are, the further we have to fall. And the opposite is true. The more the indexes pullback, the closer we are to the next bounce.

It is hard to buy when everyone else is predicting a collapse, but that is often the safest time to be buying. If a trader waited until today’s “conformation”, they would be getting in at record highs. The trader that took a chance on last week’s bounce already has a nice profit cushion protecting their trade.

Start small, get in early, keep a nearby stop, and only add to a trade that is working. That’s how we keep ourselves out of trouble.

TSLA is riding on the coattails of the index’s rebound and has bounced hard off of Monday’s lows. Was this capitulation and enough to end the 40% collapse from the highs?

That’s a good question we cannot answer it right now. It’s been a long time since this stock followed anything remotely close to fundamental analysis. That means this is a momentum trade and either momentum is still behind this stock or it’s not. With a PE measured in the thousands, there is no option other than another race higher or a spectacular collapse.

TSLA’s bounce is buyable above $600. On the other hand, this turns into a strong short if this rebound fizzles and the stock retreats back under $600.

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Mar 10

Why the S&P 500 is headed higher and the latest warning for GME owners

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 finished Wednesday up as the relative calm in the bond market continues.

Bond investors are not fundamentally any different than stock investors. They are humans that feel the same tugs of greed and fear and are equally prone to overreacting to a selloff.

Chances are good a big portion of this latest runup in bond yields was triggered by a wave of contagious herd selling that got carried away. And that is the way equity investors are treating this as they buy last week’s dip.

The thing to remember in both stocks and bonds is most owners would rather keep holding than sell what they have. These episodes of runaway selling are triggered by fear. But after several days of calm, that fear dissipates and investors are able to make more rational trading decisions. And those rational decisions almost always include continuing to hold.

For the time being, the S&P 500 is acting well and there is only one way to trade this. Keep holding for higher prices with stops in the lower 3,800s. The advantage of buying the dip early is now we have a profit margin to protect us if the selloff resumes. Move your stops up to your entry points and see where this goes.

Silliness is returning to GME and the stock was up $100 Wednesday afternoon. That was until it fell $175 in a few short minutes. The size of the collapse was spectacular and shows just how thin the buying is in this stock. While most GME owners are “holding with diamond hands”, there are not many fools left willing to pay $300 for a $20 stock. All it takes is a few owners to start locking in their profits and this will get real ugly, real quick.

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Mar 09

Why Wednesday is so critical for this rebound

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 continues bouncing between big gains and losses depending on what is going on in the bond market that day. Treasury yields fell Tuesday and that sent stocks sharply higher as equity investors let out a sigh of relief.

The S&P 500 is trading really well and extending last week’s decisive capitulation and rebound. I love the way stocks are behaving but I have far less conviction about what is going in the bond market. That makes it hard to have a lot of confidence in the sustainability of this equity bounce because it is built entirely on the bond market keeping its cool.

But as I often write, the best trades always have uncertain starts. By the time we get more clarity, the discounts will have long since disappeared. And that means we have to get in before it feels safe.

I’m not convinced this is the last we’ve heard from the bond market. In fact, I believe higher rates will be responsible for the next recession and bear market. But this is a 6-12 months story, not a right now story. At least for the time being, equity investors are feeling better and there is a good chance this week’s bounce will stick.

Without a doubt I could be wrong, but for that to happen, we need to make a lower-low. Last week’s dip set a fresh low mark around 3,750 and as long as we remain above this level, everything is progressing well enough. While I’d love to see a new higher-high, at this point, avoiding another down wave is far more important.

That makes Wednesday a critical day for the market. Extend the rebound and all is good. Violate 3,800 support and lower-lows are in our immediate future.

The best part of being aggressive and buying the bounce early is that gives us a nice margin to play with. We should have already moved our stops up to our entry points. Few things are better than free trades and even if buying this bounce turns out to be a mistake, it won’t cost us much, if anything at all.

That said, I’m still expecting higher. Hold it together Wednesday and everything is setting up for a move to fresh highs.

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Mar 08

Is complacency finally catching up to the market?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 started Monday with nice gains and it looked like we were finally shaking off the Treasury yield blues. Unfortunately, those early gains fizzled and the index ended with the eleventh loss in three weeks.

While eleven down days out of fourteen trading sessions sound absolutely dreadful, amazingly, the index is little more than 2% from all-time highs. How does that happen???

As much as bears are trying to hype the inflation fear-mongering, most owners are not falling for it and are sticking with their favorite stocks.

While market folklore frequently warns of complacency, the thing most people forget to mention is just how long complacency lasts before the fall. Quite simply, when confident owners refuse to sell, prices remain stubbornly resilient.

How much longer can this complacency last? Well, if there is one thing we know about brutal selloffs, they are shockingly quick. At the rate this pullback is moving, the market is dropping an average of 0.14% per day. That qualifies as many things, but shockingly fast is not one of them.

As long as the index remains above 3,800 support, there is nothing to do but continue giving this market the benefit of doubt.

While this bull market shrugged off dozens of bearish headlines over the last year, maybe this interest rate story is the one that finally takes us down. But if yields are going to take us down, the first thing that needs to happen is for the index to fall under 3,800 support. Until that happens, keep trading this from the long side.

If there is one thing that gives me pause about this bull market, it is the absolutely dreadful price action from the FAANG highfliers. FB, AMZN, AAPL, NFLX, and GOOGL, none of these stocks can get out of their own way and most are down more than 15% from recent highs. If something takes this market down, it will be a lack of leadership from these best-of-the-best companies.

On the other hand, if this bull market can hold it together for a little bit longer, these 15%+ discounts in these bluechip stocks will prove to be a great opportunity to buy more.

At this point, there are only two ways this plays out. Either the FAANG stocks catch up. Or they take everything down with them. I’m giving the index the benefit of doubt, but if the FAANG stocks continue lagging, I will have to reevaluate my outlook.

(As poorly as the FAANG stocks are doing, TSLA is in an entirely different category and I’ll cover this former darling Tuesday evening.)

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Mar 04

Who is in worse shape, the S&P 500 or TSLA?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Thursday was another bad session for the S&P 500. Not only was this the third loss in a row, but the previously rock-solid 3,800 support crumbled before our eyes.

As bad as this sounds, putting this pullback in perspective, today’s 3,768 close would have been a record high less than two months ago. This latest selloff only looks bad when compared to where we were a few weeks ago.

That said, it feels like sentiment flipped from half-full to half-empty following this latest runup in interest rates. As I wrote yesterday:

Even if this rise in yields is nothing more than another false alarm, the only thing that matters over the near-term is if equity investors believe this is the real deal. If they want to abandon the market and sell their favorite stocks at steep discounts, no one can stop them.

And that’s exactly what happened Thursday as the index crashed through support. This violation of 3,800 was shortable with a stop just above this level. At this point, proactive shorts should be moving their stops to at least their entry point, making this a free trade.

I have no idea how much further this selloff will go, but chances are it will only last a few days and that means shorts need to be ready to lock-in profits quickly. Fight the urge to get greedy. Remember, this is still a bull market and these things bounce hard and fast. Hold a little too long and all of your short profits will evaporate.

Jumping from the frying pan and into the fire, the S&P 500’s 5% loss pales in comparison to TSLA‘s 30% collapse. Back in mid-February, I warned TSLA owners to get defensive if the stock retreated under $800 support. And here we are a few weeks later, testing $600. And before anyone starts thinking the worst is behind us, a dip under $600 could easily fall all the way back to $400. I don’t think anyone needs to be told holding through a 50% pullback is an awful pill to swallow.

Savvy traders lock-in profits when everyone else is overcome with greed. And those same savvy traders are there to pick up the pieces when the crowd gets terrified and starts selling their stocks at steep discounts.

If a person locked-in profits back at $800, no doubt they are hoping TSLA tumbles all the way back to $400. I’m not sure this falls that far, but it will definitely get worse before it gets better.

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Mar 03

Why savvy bulls should be rooting for a larger pullback

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Everything seemed so promising for the S&P 500 Monday afternoon following the biggest up-day in nine months. Fast forward two sessions and everything feels different.

While the index hasn’t violated last week’s lows, retesting support so soon after bouncing off of it is never a good sign. We want to see a surge of relief buying carry us higher, not waves of nervous selling knock us back down.

And while I count myself as one of the bulls, I recognized this retreat was a real possibility. As I wrote Monday evening:

The one thing that would make me reconsider all of this above is if the index retreats back to 3,800 over the next few days. If this bounce is the real deal, it shouldn’t look back. If prices retest support so soon after the bounce, the selling isn’t over.

All of this uncertainty stems from equity investors’ newfound obsession with 10-year Treasury yields. Yields go up, stocks go down. It doesn’t get any more complicated than that.

As I wrote last week, I don’t think this rise in yields is the real deal. Unfortunately, the market never once asked me what I think. Even if this rise in yields is nothing more than another false alarm, the only thing that matters over the near-term is if equity investors believe this is the real deal. If they want to abandon the market and sell their favorite stocks at steep discounts, no one can stop them.

I continue to believe this rise in rates is not the real deal and further, major bull markets do not turn off like a light switch. That said, even if this latest wobble ultimately resolves to the upside, things could get fairly bumpy over the near-term if nervous traders continue overreacting to these interest rate headlines.

If the S&P 500 undercuts 3,800 support, expect stock owners to start panicking as if the end is coming. That frenzied selling will likely last for a few days. But once it dies off, those of us that practice safe trading and sold at much higher levels have the cash to start snapping up all of those attractive discounts.

Speaking of safe trading strategies, by now most people who were following this rally higher with a sensible trailing stop have locked in their profits and are waiting for what comes next. Get ready because the bounce is coming. We just don’t know if this will bounce off of 3,800 again (boring!) or something much lower. (I’m hoping for much, much lower!)

Either way, be ready to put your cash to work. As always, wait for the bounce, start small, keep a near-by stop, and only add to a trade that is working. If the first bounce fizzles, no big deal, pull the plug and wait for the next one.

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Mar 02

A little good and a lot bad

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

On Monday the S&P 500 produced its biggest gain since last summer. On Tuesday it gave back a chunk of those gains. Two steps forward, one step back.

There is nothing wrong with a minor step back following such a large up-day. The key is hanging on to what’s left. Stay above 3,850 and everything is fine. Falling under 3,800 so soon after bouncing off this key support level tells us there is a serious demand problem and the selling is only just getting started.

This bull market deserves the benefit of doubt because it hasn’t let us down yet. Until we experience a more material breakdown, expect every dip to bounce within days, if not hours. If this market was fragile and overbought, it would have collapsed a long time ago. (Pro-tip for all the cynics out there, weak fragile don’t keep setting record highs.)

But enough about the indexes. One of the most noteworthy stock performances of the day came from ZM. It announced blowout quarterly results Monday after the close and the stock popped Tuesday morning. Unfortunately, that was as good as it got. Within hours, that impressive 8% opening gain turned into a dreadful -9% closing loss. That’s a 17% swing from the highs to the lows.

There are few things in the stock market that look worse than this. In fact, I cannot think of anything worse than such an epic midday collapse. Rather than cheer the news, most owners did their best impersonation of rats abandoning a sinking ship.

A stock that cannot go up on good news is in desperate shape and destined to keep going lower. ZM is a strong short as long as it remains below $400.

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Mar 01

The mistake bears are making

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 popped 2.4% in the biggest up-day since last summer. There wasn’t a clear headline driving Monday’s flurry of buying. Instead, this was a sharp snap-back from last week’s reflexive herd selling that got too carried away.

As I wrote last week, 3,800 was the tipping point. Either we fall over the edge or we bounce decisively off of support. Given the elevated volatility, there really wasn’t anything in between. And fortunately for the bulls, we got that decisive rebound off of support.

Like many people last week, I believe rising interest rates are what is going to kill this bull market. I just don’t think this is that time. Despite everyone trying to call a top, bull markets don’t die with the flip of a switch. Topping in a process that takes months.

We are only days removed from the last record high. If there is one thing we know about weak markets, they don’t keep setting new record highs. Until we see a clear pattern of lower-highs, assume this bull market is very much alive and well.

This bull market will die like all of the others that came before it. But this is not that time.

(Note: The one thing that would make me reconsider all of this above is if the index retreats back to 3,800 over the next few days. If this bounce is the real deal, it shouldn’t look back. If prices retest support so soon after the bounce, the selling isn’t over.)

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Feb 25

Why the cynics are right but they will probably still lose money

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Volatility exploded this week as the S&P 500’s last three trading sessions produced some of the largest intraday swings of the year.

The biggest wild card continues to be 10-year Treasury yields, surging from 0.5% last autumn to 1.5% today. While 1.5% is trivially small by historical standards and investors are not afraid of these 1.5% rates, they are afraid this surge will turn into 3% or even 5% over the next several months.

Remember, the investors don’t price stocks based on where we are today, but what they think we will be in six to twelve months.

Stocks are stupid expensive by conventional measures (forward P/Es, etc). But these valuations are actually reasonable given these historically low interest rates. That’s because the lower interest rates are, the more valuable future cash flows become.

The problem is one percent interest rates justify really high stock valuations. Four percent interest rates do not. And that’s the million-dollar question, where are interest rates headed?

With all of this money printing supporting the Covid economy, most people assume inflation and higher rates are inevitable. But you know what? They said the same thing after the Fed pumped the economy full of cash following the housing bubble and 2008 financial crisis. Quite a few “forward-thinking” hedge funds lost a ton of money a decade ago when they bet on higher inflation and ended up being wrong.

Now I will count myself as one of the people concerned about inflation and higher interest rates. As I described, these crazy high stock valuations are built on a foundation of low interest rates. Take that away and the whole thing comes crashing down.

I have little doubt higher interest rates are what will kill this bull market. The problem is I don’t know when it will happen. As I’ve written previously, these rallies go so much further and last way longer than anyone thinks possible. While we might already know how this ends, the demise is still probably a few innings away.

The one thing we know for sure is dying markets do not keep making new highs. If the S&P 500 returns to the highs over the next few days, all of this talk of the end is premature. If prices retreat under recent lows, then we have to take this more seriously.

The great thing about being independent investors and traders is we don’t have to predict the future. We are small enough that we can react to these developments in real-time as the future unfolds in front of us. If the market bounces tomorrow, buy and hold. If prices retreat under the lows, sell and even consider going short.

It doesn’t get any more straightforward than that. Volatility is picking up, meaning the next move will be large. We just need the market to pick a direction and then hang on.

My intuition and educated guess is higher, but I have no problem being wrong. (In fact, I’ll make more money if stocks decline sharply, so here’s to hoping I’m wrong!)

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