Category Archives for "End of Day Analysis"

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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Feb 24

Is GME making a comeback?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finally bounced in a meaningful way on Wednesday, resulting in the best trading session since early February. As bad as things felt following five consecutive losses, Wednesday’s gain puts the index within 0.2% of yet another record close. Funny how that works.

But this shouldn’t surprise anyone. As I wrote Tuesday:

The market took the long route, but Tuesday’s small gain finally broke the five-session losing streak. And more than than just ending a losing streak, the decisive rebound off of 3,800 support looks a lot like capitulation. It was an ugly day, but fortunately it had a happy ending.

The index is in good shape and at this point, fresh highs are pretty much a foregone conclusion. But that’s not what I want to write about tonight. There are so many exciting things going on in the FAANG highfliers, TSLA, and Bitcoin. But just when everyone stopped talking about GME, it came roaring back with a 100% gain and it surged another 200% in the after-hours session.

Can you believe someone paid nearly $200 for GME when the stock was selling for $48 just a couple of hours earlier??? As Forest Gump famously said, “Stupid is as stupid does.”

Haven’t we already seen this movie? But people never learn and this was entirely predictable. Back in early February, I wrote:

As for what comes next, GME will be insanely volatile for weeks and even months. That means 50% and 100% moves in both directions. But at this point, a 50% bounce only gets us back to $75. Maybe we get back to $100 or even $125, but waiting for anything higher is just wishful thinking.

For weeks late-to-the-party GME buyers were praying for a chance to get out and recover some of their foolish losses. Well, thank your lucky stars because here is your chance.

Unfortunately for many, those feelings of regret will quickly be overcome by a second wave of greed and they will start dreaming of that $1k payday again.

There is nothing wrong with riding this wave higher as a quick trade to make a buck. But anyone thinking this is going to the “moon” has no idea how the market works.

Keep holding for higher prices but use a trailing stop and get out when this turns south because this stock won’t get back above $100 after this dead cat bounce fails.

“Fool me twice, shame on me.”

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Feb 22

Is this finally the top?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 slipped for the fifth consecutive session and Monday’s losses were the worst yet. That said, this -0.8% “tumble” still leaves us little more than 1% from all-time highs. (Hardly panic material.)

As boring as the market has been the last few weeks, things have started getting a little spicier:

  • Bitcoin exploded higher and nearly hit $60k Sunday…before tumbling 20% Monday.
  • The surge in 10-year Treasury yields has doubled from last year’s lows. (Most people blame this latest stock market wobble on the rise of interest rates.)
  • And few stocks are taking this rise in rates worse than the highflying FAANG darlings, with most of them down between 10% and 15% from their highs. (GOOGL is the lone exception but it is doing its best to catch the others.)

Last week I said this recent bout of selling wasn’t meaningful and Monday’s loss doesn’t change my mind.

While this selloff could be the real deal, odds are strongly against it. If something bounces two dozen times and it reverses only once, what is the most likely outcome of any individual occurrence? As obvious as the answer seems, every time prices slip from the highs, people reflexively start calling it a top.

While these naysayers will eventually be right, like a broken clock, they will be wrong dozens of times first. Is this the one time they get it right? Probably not.

That said, I’m not willing to ride this one all the way down if I’m wrong. I have clearly defined stops in the mid 3,800s and if the market falls to those levels, I’m out, no questions asked.

And you know what, I actually hope I’m wrong because a larger pullback would create far more profit opportunities than if this is just another minor dip and bounce.

I’m holding for higher prices until my stops are hit. And if I’m wrong, even better!

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Feb 18

Do three losses in a row change anything?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

On Thursday, the S&P 500 experienced its biggest drop in three weeks. As worrying as that sounds, this modest, 0.4% decline highlights just how calm the market has been lately.

January’s late stumble was fueled by the truly shocking behavior in a handful of “meme stocks”. But just a few weeks later and that already feels like ancient history as GME, AMC, and BB have already returned to more pedestrian levels. As expected, their rise and subsequent collapse didn’t affect the wider market and all of the old rules still apply.

Even with the index falling all three trading days this week, prices remain within 1% of all-time highs.

As I wrote yesterday:

We’ve had plenty of bearish headlines over the last several weeks and months. If bad news was going to take this market down, it would have happened by now. As I often say, a market that refuses to go down will eventually go up.

And despite today’s third loss, nothing changes. This remains a resilient market and even the strongest ones cannot go up every single day.

But just because this week’s losses have been modest doesn’t mean the index cannot slip even further. Everyone knows stocks take a step back for every two-step forward.

Maybe this latest bout of selling continues Friday and into Monday. But even if it does, no big deal. As prudent traders, we have predetermined stop-loss levels and we will get out if they get hit.

And if this dip proves to be yet another false alarm, no big deal, it is easy enough to get back in when the index bounces.

While I believe this market will continue higher over the near-term, this isn’t a hill I’m willing to die on. If I’m wrong, I get out and then try again next time. But until my stops get hit, I’m holding for higher prices.

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Feb 17

If you cannot beat them, join them

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished in the red for the second day in a row and finds itself down four out of the last six trading sessions.

As awful as that sounds, the index remains within 0.1% of its all-time closing high. Funny how that works.

If bears are going to kill this bull market, they need to do a lot better than -0.03% and -0.06%. If that’s all they got, then bulls have nothing to worry about.

We’ve had plenty of bearish headlines over the last several weeks and months. If bad news was going to take this market down, it would have happened by now. As I often say, a market that refuses to go down will eventually go up.

The way this is going, 4,000 is only days away.

Stick with what has been working. Keep holding for higher prices and continue moving our trailing stops up.

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

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Feb 16

Is it time to get defensive with TSLA?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

TSLA finds itself at a critical inflection point Tuesday, closing under the increasingly significant $800 level.

$800 has been supporting this stock since early January. We tested this level a couple of times since then, but both flirtations were quick and prices bounced decisively the next day. Will this time turn out any different? That’s the $764 billion dollar question.

TSLA reported record-breaking earnings late last month and the company threw fuel on the fire last week when it announced a $1.5 billion investment in bitcoin. (Its purchase is already up nearly 50%!)

Surely the stock would be sharply higher following two-pieces of such bullish news… Yeah, no. The stock tumbled 8% following earnings and coincidentally enough, it is also fell 8% after the bitcoin news.

Two pieces of great news and the stock fell both times. A stock that cannot go up on good news is a huge red flag. Either investor expectations are unreasonably high and even great news is no longer good enough. Or we are reaching the saturation point where everyone who wants to buy TSLA has already bought the stock and there is no greater fool left to keep pushing prices higher.

I’m not ready to give up on the stock simply because it closed a measly $3 under $800 on Tuesday. But it is enough to force me to take a more defensive posture. This stock is definitely ownable above $800, but we need to be really careful under this key support level. The stock surged $400 since November and even good stocks experience routine and even healthy step-backs on their way higher. The scary thing is a routine and healthy step-back could lop $200 off the price.

I’m not turning against TSLA, but as long as it stays under $800, this becomes a prove-it situation. The prudent move is to lock-in some profits and see what happens. If prices bounce back above $800 tomorrow or the next day, it is easy enough to buy back in. On the other hand, if prices challenge $600 support over the next few weeks, even better. Take those profits and buy the next bounce.

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Feb 12

The only way to trade this “too high” market

By Jani Ziedins | End of Day Analysis

Free Weekly Analysis: 

It was another good week for the S&P 500 as it added 1.2% and continues grinding its way into the record books.

It’s only been two weeks, but the meme stock feeding frenzy is definitely over. GME retreated 89% from the highs and AMC is down 73%, with both stocks slipping another 20% this week.

It was spectacular while it lasted, but anyone with even the smallest amount of market sense knew this spectacular collapse was inevitable. The market loves symmetry and what races higher with breathtaking speed ends up crashing down just as quickly. No conspiracy needed.

As for the indexes, they are relieved the meme frenzy left as quickly as it came. The old rules still apply and conventional investors don’t need to worry about these bubbles infecting to the rest of the market. Those reassurances put the nearly year-long rally back on track and pushed the index back to record highs.

That said, most of the index’s strength is coming from beaten down, garbage stocks catching up as the economy starts rebounding from Covid. The FAANG stocks have been stuck in neutral lately, but this was expected.

The strongest stocks bounced early in the recovery and they have less room left to go. I don’t mind this underperformance as long as the FAANG stocks keep treading water. But for the entire market to start the next meaningful leg higher, we need the best-of-the-best companies to wake up and start leading the charge. Until then, expect further index gains to be slow and fitful.

If stock prices were overbought and vulnerable, we would have crashed by now. This market still wants to go higher and there is only one way to trade it. Keep holding for higher prices and lifting our trailing stops up.

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Feb 11

The stock proving me wrong

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

While meme stocks dominated the financial press over the last few weeks, an old favorite came back to life under the radar.

As the world fixated on GME and AMZ, ZM quietly went about its business, reclaiming the all-important $400 support level. This was a major technical achievement and back in mid-January I told readers to be on the lookout for it:

ZM needs to get above $380 resistance to break the larger downtrend….and this will be a lot more interesting if it gets back above old support at $400. 

Now I’ll be honest, I was pretty hard on the stock back in early January because its price action was absolutely dreadful. But as opportunistic traders, no matter what we think, we need to keep an open mind when the evidence changes.

Rather than extend the selloff, ZM found a floor and actually started challenging $400 resistance not long after I wrote my last post.

I was skeptical about this bounce at first. But as I wrote in January, getting above $380 broke the downtrend and things really started looking good once it reclaimed $400 last week.

If a person was short, there have been plenty of clear and obvious signals to cover and lock-in those nice profits. And for the patient dip buyer, clearing $400 last week gave us a very sensible entry with a low-risk stop-loss just under this level.

Will this bounce stick and turn into a larger recovery? I don’t know. But as long as this stock remains above $400, it deserves the benefit of doubt.

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Feb 10

When boring is profitable

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

There was a little up and a little down, but by the time it was all said and done, the S&P 500 finished Wednesday almost exactly where it started.

This week’s pause is nothing more than cooling off following last week’s long string of up-days. Two-steps forward, one-step back. It doesn’t get any more complicated than that.

Confident owners are stubbornly holding for higher prices and that means every dip bounces within hours. In today’s case, the selling was measured in minutes.

This calm and gentile climb higher cannot last forever and there will be multiple cases of extreme fear and uncertainty this year, but this is not one of those times. Until further notice, this bull market is alive and well and there is only one way to trade this.

No doubt, readers crave deep insights and criticizing the herd is one way pundits make themselves sound sophisticated. But more often than not, successful trading is as simple as going with the flow. There is nothing sophisticated about that. In fact, it’s downright boring and unimaginative. But as long as I’m making money, I’m okay with boring and unimaginative.

No doubt more challenging times are ahead of us. And chances are we will be longing for these boring and easy trades soon enough. But until then, stick with what has been working and that is riding this grind higher.

If this market was fragile, overbought, and on the verge of breaking down, it would have happened by now.

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Feb 09

Why this TSLA / bitcoin marriage will not live up to the hype

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Yesterday, I wrote about TSLA buying $1.5 billion worth of bitcoin from TSLA’s perspective. (TL;DR I’m not a fan.) Tonight, I’m looking at this transaction from bitcoin’s point of view.

For the millennial, Robinhood vigilante, this marriage between two of their favorite momentum darlings is a match made in heaven. The only way this could get any better is if it turns into a three-way with GME getting invited to the party. (Maybe Elon will surprise us with this announcement next week!)

Anyway, Elon Musk putting his money (actually, his shareholders’ money) where his mouth is was a huge boost in bitcoin’s credibility. This is far and away the largest and most mainstream embrace of bitcoin by corporate America yet. It’s no surprise the cryptocurrency surged 20% on the news.

As I wrote previously, Bitcoin was consolidating in the $30k’s after last year’s breakout above $10k resistance. I expected this consolidation would last a little longer than a few weeks, but that’s why we trade the price action, not what we think. Bitcoin broke above $40k and that immediately made it buyable.

And as long a bitcoin remains above $40k it is ownable. Keep holding for higher prices and lifting our trailing stops.

As for what this deal means for bitcoin long-term, don’t expect many corporations to follow TSLA’s lead. Most CEOs are not as brash as Elon and there is no way they would put their reputation or their job on the line for something as volatile as BTC. All it takes is a very normal dip in BTC prices and TSLA will be forced to report hundreds of millions of dollars in quarterly losses during their next earnings report. (Mark-to-market reporting required by the SEC.) Once that happens, any potential interest in BTC will vanish along with TSLA’s profits.

What this means for bitcion is it is still up to individual speculators to keep pushing prices higher. Are there enough people willing to buy bitcoin above $40k? We will find out soon enough.

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Feb 08

A rant against TSLA and a reason to own the stock anyway

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Bitcoin surged 20% and hit $47k after Elon Musk announced TSLA bought $1.5 billion worth of the cryptocurrency.

While this is great news for bitcoin owners, it is borderline negligent for TSLA shareholders. TSLA is a car/battery/solar panel company. It is most definitely not a hedge fund. It doesn’t have the mandate from shareholders or the skillset necessary to speculate in cryptocurrencies.

If the highest and best use of TSLA’s cash is to buy cryptocurrency, then it should sell its car division and invest the proceeds into Bitcoin. Or even better, give that money to back shareholders and let them decide the best way to invest it.

But no, Elon is gambling shareholders’ money and chances are good this will end in a giant writedown at some point. And given TSLA’s modest 1.3% gain today, shareholders were not overly enthused about this idea either.

Decisions like this show a lack of fiscal discipline and while Elon has gotten away with big risks in the past, the problem with luck is it always runs out. While this $1.5 billion is largely immaterial to the company’s long-term prospects, it demonstrates a carelessness with shareholder money and no doubt that will come back to haunt the company when Elon’s luck runs out.

But this is a problem for another day. Until then, the Cult of Elon is strong and as much as I disagree with this move on principle, most shareholders put Elon on a pedestal and he can do no wrong. Momentum is higher and there is no reason to think today’s announcement changes the upward trajectory of this stock.

The near-term outlook is for higher prices but never get far from the exits because there is a frightening amount of air underneath us. The question isn’t if this stock falls, but when. If you have a solid plan for protecting your profits, you will be fine.

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Feb 04

What the Reddit “millionaires” should be doing now

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Well, that didn’t take long.

As usual, the market loves symmetry. Something that races up like a rocket will come crashing down like a rocket. And that’s exactly what happened to GME this week.

As my dad always reminded me every time I screwed up, “Easy come easy go.” (Thanks, dad.)

The fact GME crashed isn’t a surprise. To me, the only surprise was just how absurdly high this got before it crashed. I know the market loves taking things to extremes and I have seen a lot of crazy things in my time, but this 10,000% move over several weeks creates an entirely new category of insane.

That said, this ending was inevitable.

Seven days ago in my free blog post, I wrote the following to all of the new Reddit millionaires out there:

The problem is when these people are sitting on a mountain of profits, rather than thank their lucky stars and locking-in these once-in-a-lifetime profits, they are too busy gloating and taunting the other side. Instead of being satisfied with nearly $500, bulls insist on waiting until this goes all the way to $1,000 or even $5,000. 

Well, with GME down nearly 90% since last week’s intraday highs, most of those Reddit millionaires are now Reddit thousandaires. At least the lucky ones are still thousandaires. Others have a whole lot of explaining to do when their wives discover the down payment for a house has gone missing.

For those that still have money left in the market, there is no reason to ride this all the way into the dirt. Cash in what you have left, learn from this lesson, and come back to the market better prepared next time.

Experience is the name we give our mistakes. Everyone who traded GME over the last two weeks got several years’ worth of experience in just a handful of days. Take these lessons and grow from them.

As for what comes next, GME will be insanely volatile for weeks and even months. That means 50% and 100% moves in both directions. But at this point, a 50% bounce only gets us back to $75. Maybe we get back to $100 or even $125, but waiting for anything higher is just wishful thinking.

For everyone that was introduced to the stock market because of GME, while it didn’t turn out the way people had hoped, use this opportunity to learn more about the stock market. For many of us, this has turned into a lifelong adventure.

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Feb 03

Should we trust this bounce?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 was more flat than anything Wednesday. But by finishing 0.1% in the green, that was good enough for the third up-day this week, leaving the index 1% shy of all-time highs. Not bad given the fear and anxiety that washed over the market during last week’s 3% pullback.

Stocks go up and stocks go down. That’s what they do. Just because the index goes down, don’t automatically assume something is wrong. And the same applies to the subsequent bounce. Unfortunately, most investors cannot resist the impulse to overreact to every dip and bounce in the road.

Humans love trends and we turn every two dots into a line that extends forever into the future. But that’s not the way markets work. Most daily gyrations amount to nothing more than meaningless noise.

What we do know is every dip over the last several months bounced within days, if not hours. That trend is built on dozens of data points and actually means something. And you know what? That longer-term trend endured despite all of the fear and uncertainty that consumed the herd last week.

The most important development was last week’s selling stalled and bounced. That reconfirms most investors are still in this for the long-haul and remain reluctant to sell bearish headlines or negative price-action.

Right or wrong, when owners refuse to sell, stocks remain stubbornly resilient. While this cannot last forever, it will continue for at least a bit longer.

As long as we keep getting more up than down, everything is going according to plan. Don’t fight what is working.

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Feb 02

Why GME is down and the indexes are up

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Tuesday sharply higher as air continues coming out of Reddit’s GME, AMC, and SLV trades.

AMC tumbled 62% in just a few days. GME is down 82% from last week’s intraday highs. And even silver took it on the chin, falling 12% from yesterday’s early levels.

Easy come easy go. But everyone with even a rudimentary understanding of market mechanics knew this outcome was inevitable. It didn’t take a “Wall Street conspiracy” to kill this frenzied buying. Instead, these small millennial buyers simply ran out of cash and there was no greater fool left to buy a struggling retailer up nearly 10,000%.

The broad market is clearly relieved the old rules still apply. Every day GME rallied last week, the indexes fell. And this week, every day GME fell, the indexes rallied.  This is Reddit thin is quickly turning into nothing more than a flash in the pan. Rather than upend the entire market and send it into chaos, this is turning out to be little more than a novelty that is fading as quickly as it came.

That said, these ripples will be felt for a while. GME already bounce 100% off of this morning’s lows. Between another wave of gullible buyers rushing in to “buy the dip” and shorts closing positions with spectacular profits, there will be a good amount of buying in these names for a while and they will continue trading at elevated levels. (Far off the silly highs, but well above where they started.)

But from the index’s point of view, this was a minor sideshow and the bull market is ready to proceed after last week’s brief dip and reset.

Remember, bull markets bounce countless times, but they reverse only once. So far this looks like nothing more than another one of those momentary stepbacks on our way higher.

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