Category Archives for "End of Day Analysis"

Keep doing what is working

By Jani Ziedins | End of Day Analysis

End of Day Update:

The S&P500 added modest gains Tuesday. This strength largely puts last week’s “collapse” in the rear-view mirror. Sharp selloffs are breathtakingly quick and this is the fourth day we’ve held 2,460 support. If this market was vulnerable, we would have tumbled by now.

This resilience won’t surprise regular readers of this blog. Confident owners have ignored every other reason to sell stocks this year and nothing changed last week. In fact there really wasn’t any news driving Thursday’s dip. It was simply a case of reactive traders overreacting to each other. Once this brief bout of weakness passed, hours later dip buyers were back at it. If confident owners showed zero interest in selling rate-hikes and political dysfunction at home and abroad, why would they all of a sudden be spooked out of the market for no reason at all? Answer is they weren’t and that’s why Thursday’s selling reversed so quickly.

While conventional wisdom tell us to fear complacency, what it often leaves out is periods of complacency last far longer than anyone expects. Without a doubt this bull market will die like every other that came before it. But that doesn’t mean we cannot go higher in the meantime. These failed selloffs tell us the path of least resistance remains higher and smart traders keep doing what is working.

That said, this is the most nervous I’ve been since the 2009 lows. Last year’s paranoid, half-empty outlook has given way to this assume everything will work out, half-full outlook on the world. Markets are normally nervous and tend to fear the worst, but this market is anything but nervous. But this doesn’t come as a surprise. After years of regretting every defensive sale, traders have learned to ignore the outside noise. If sequesters, Greek collapses, Brexits, rate-hikes, Chinese bubbles, and all the other noise didn’t matter, then surely nothing going on right now is worse than that. Right now most owners are more afraid of being left behind than they are of losing money. While this cannot last forever, as long as confident owners don’t sell, supply stays tight, and prices remain firm.

Assuming everything will work out is typically the right decision and is why I’m a big fan of buying dips, but eventually we come across something that turns out worse than feared. I have no idea what will take us down, or when it will happen, but I know it is coming. I’m not ready to give up on this market because it is acting so well, but I am standing close to the door and ready to jump at the first signs of trouble. Normally a nervous market is priced at a discount and that compensates us for taking the risk of owning stocks. Unfortunately this market is priced for perfection and that leaves little margin for error. The path of least resistance remains higher, but this is the most dangerous the market’s been in nearly a decade.

The biggest advantage of being a small trader is we can close our positions in minutes. We don’t need to predict what will happen ahead of time because we have the luxury of being able to wait for the market to tell us what it wants to do. While it is tempting to argue with an overvalued, complacent market, resist that urge. Keep doing what is working, but stay vigilant and be ready to react when something changes.

Previously I thought Trump’s inability to enact meaningful tax reform would be the undoing of the Trump rally. But given how little the market reacted to the GOPs inability to agree on anything makes me think the market really doesn’t care about tax reform. If legislative progress was important, Trumpcare’s crash-and-burn would have taken some air out of this market. Instead we continue hanging out near the highs. Same goes for the expanding Trump/Russia investigation. Maybe these will matter at some point, but right now the market doesn’t care and neither should we.

Keep doing what is working. Stick with your buy-and-hold positions. These minor fluctuations are too small to swing-trade effectively, but it is wise to keep some cash ready for the next big trading opportunity. Even though this market is painfully boring, I expect things will liven up when big money managers return from summer vacation and start positioning for year-end.

We are up approximately 10% year-to-date, but I don’t expect us to finish here. Volatility will pick up this fall, I just don’t know whether that means underperforming money managers will be forced to chase price higher into year-end, or if the wheels will fall off the Trump rally and we come crashing back to earth. Most likely we will witness a chase into year-end, but remain wary of anything that doesn’t go according to plan. Complacency means most owners will be slow to react to changing conditions. That will give us plenty of time to get out before things get ugly.

Jani

Fixed Link: Enjoy the calm, but don’t expect it to last

By Jani Ziedins | End of Day Analysis

End of Day Update:

The S&P500 added modest gains Tuesday, easily erasing the last three days of nominal selling and pushing us back into record territory. Earnings reports were good enough and the Senate voted to allow debate on healthcare reform. That put traders into a buying mood and pushed us closer to the psychologically significant 2,500.

While today’s strength broke a three-day losing streak, a 4-point dip over three days hardly qualifies as a selloff. In fact the last three days of restrained selling is actually quite bullish. The market opened the door and gave owners an invitation to take profits, yet the vast majority chose to stay put. They don’t want to sell because they are patiently waiting for higher prices. No matter what the pundits tell us should happen when complacency is this widespread, when confident owners don’t sell, supply stays tight, and prices remain firm. This calm cannot last forever, but it will last far longer than most people expect.

While it is still early in earnings season, if there was a major problem with the economy, it would have shown up by now in the companies that have already reported. The same goes for the other side, if we were going to have a blowout quarter, we would know that by now too. Instead earnings have been good enough to keep our slow climb higher going, but not so great as to launch us higher.

Politics in D.C. is a circus as usual, but it hasn’t been bad enough to affect the markets yet. In fact the market seems to be largely ignoring politics. I’m not sure if that’s because traders are giving Trump and the GOP benefit of doubt and assume everything will work out in the end. Or the market has such low expectations for Trump and Co. that this shit show is hardly a surprise. Either way the market is ignoring politics for the time being and so should we. It will matter at some point, but this is not that point and a trader can lose a lot of money jumping on a good trade too early.

For most of the last eight years people have been saying buy-and-hold is dead, but paradoxically this has been one of the greatest times to buy-and-hold. This is especially true over the last few months. This half-full market simply won’t selloff and that makes it hard find swing-trading opportunities. Only the most nimble day-trader can take advantage of these five-point, two-hour long dips. The rest of us are better off sticking with our positions. That means continuing to hold our buy-and-hold stocks, or sticking with cash while waiting for a better trading opportunity. (Ideally a diversified trader has a bit of both.) The choppy nature and quick reversals in this market make trading dangerous because it is far too easy to get tricked into buying high and selling low. The key to long-term success doesn’t come from our winners, but avoiding giving back all of our profits during slow times. It is hard for a trader to sit on his hands, but that is the best call here.

The path of least resistance remains higher. Trade accordingly. 2,500 is easily within reach, even if it takes us a little while to get there. Things will get a lot more interesting this fall once big money managers return from vacation. The S&P500 is up 10% for the year, but the chances of us finish the year at these levels is highly unlikely. Either everything will go according to plan and Trump’s policies will shift the economy into the next gear. Or our leaders will fail us and the air will come out of the Trump rally. While I don’t know which way we will go, I do know good trading opportunities are just around the corner.

Jani

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Enjoy the calm, but don’t expect it to last

By Jani Ziedins | End of Day Analysis

End of Day Update:

The S&P500 added modest gains Tuesday, easily erasing the last three days of nominal selling and pushing us back into record territory. Earnings reports were good enough and the Senate voted to allow debate on healthcare reform. That put traders into a buying mood and pushed us closer to the psychologically significant 2,500.

While today’s strength broke a three-day losing streak, a 4-point dip over three days hardly qualifies as a selloff. In fact the last three days of restrained selling is actually quite bullish. The market opened the door and gave owners an invitation to take profits, yet the vast majority chose to stay put. They don’t want to sell because they are patiently waiting for higher prices. No matter what the pundits tell us should happen when complacency is this widespread, when confident owners don’t sell, supply stays tight, and prices remain firm. This calm cannot last forever, but it will last far longer than most people expect.

While it is still early in earnings season, if there was a major problem with the economy, it would have shown up by now in the companies that have already reported. The same goes for the other side, if we were going to have a blowout quarter, we would know that by now too. Instead earnings have been good enough to keep our slow climb higher going, but not so great as to launch us higher.

Politics in D.C. is a circus as usual, but it hasn’t been bad enough to affect the markets yet. In fact the market seems to be largely ignoring politics. I’m not sure if that’s because traders are giving Trump and the GOP benefit of doubt and assume everything will work out in the end. Or the market has such low expectations for Trump and Co. that this shit show is hardly a surprise. Either way the market is ignoring politics for the time being and so should we. It will matter at some point, but this is not that point and a trader can lose a lot of money jumping on a good trade too early.

For most of the last eight years people have been saying buy-and-hold is dead, but paradoxically this has been one of the greatest times to buy-and-hold. This is especially true over the last few months. This half-full market simply won’t selloff and that makes it hard find swing-trading opportunities. Only the most nimble day-trader can take advantage of these five-point, two-hour long dips. The rest of us are better off sticking with our positions. That means continuing to hold our buy-and-hold stocks, or sticking with cash while waiting for a better trading opportunity. (Ideally a diversified trader has a bit of both.) The choppy nature and quick reversals in this market make trading dangerous because it is far too easy to get tricked into buying high and selling low. The key to long-term success doesn’t come from our winners, but avoiding giving back all of our profits during slow times. It is hard for a trader to sit on his hands, but that is the best call here.

The path of least resistance remains higher. Trade accordingly. 2,500 is easily within reach, even if it takes us a little while to get there. Things will get a lot more interesting this fall once big money managers return from vacation. The S&P500 is up 10% for the year, but the chances of us finish the year at these levels is highly unlikely. Either everything will go according to plan and Trump’s policies will shift the economy into the next gear. Or our leaders will fail us and the air will come out of the Trump rally. While I don’t know which way we will go, I do know good trading opportunities are just around the corner.

Jani

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Don’t fight what’s working

By Jani Ziedins | End of Day Analysis

End of Day Update:

Even though the S&P500 traded flat Thursday, holding near the highs was a win for bulls. We opened the day with modest losses, but little more than an hour later traders were enthusiastically buying a five-point dip. Selloffs that used to last multiple days and set us back several percent are now being bought within hours and a handful of points. But this shouldn’t come as a surprise. Any defensive sale over the last 12-months was a costly mistake and traders have learned their lesson. Hold no matter what. Headlines stop mattering when no one sells them.

Conventional stock market wisdom warns us about this type of complacency, but what conventional wisdom fails to mention is that these periods of complacency can last a long, long time. Confident owners don’t sell and that keeps supply tight. It is really hard for any selloff to build momentum when so few owners sell the weakness.

More recently this market transitioned from a fearful, half-empty outlook to today’s everything is fine, half-full attitude. Rate-hikes? Political dysfunction? Expanding investigation into our president? Meh, whatever. The market is giving the benefit of doubt to Trump, Congress, and the Fed. Since we trade the market we are given, we need to give them the benefit of doubt too. But that doesn’t mean we trust absolutely.

I get nervous when everyone else is calm and confident. And right now this is the most nervous I’ve been since the 2009 market bottom. This market used to be afraid of its own shadow and that uneasiness kept prices in check. But that is no longer the case. Risk is a function of height and these record highs make this the riskiest place to own stocks since the 2007 top. The path of least resistance remains higher and it is definitely premature to fight this market, but we need to be careful.

As small traders we have the nimbleness that allows us to jump in and out of the market at a moment’s notice so we don’t need to adopt a defensive strategy prematurely. Unlike big money managers, we can wait for the market to tell us it is time to take profits and start trading the other direction. But we are not there yet. This remains a buy-and-hold market at least until the end of summer. After that things will get a lot more interesting. Until then enjoy the slow climb higher.

Jani

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Is it Time to Worry?

By Jani Ziedins | End of Day Analysis

End of Day Analysis: 

The S&P500 collapsed Tuesday in one of the worst selloffs in over a month. Of course “collapse” is a relative terms since today’s weakness didn’t even knock a full percentage point off of the S&P500. But given how benign the stock market has been recently, 0.8% is shocking enough to grab everyone’s attention. The tech heavy NASDAQ took a bigger hit, shedding 1.6%, but to put things in perspective, both indexes are still within a few points of all times highs.

The headline that turned early weakness into a waterfall selloff was the GOP abandoning the planned health care vote because they didn’t have to votes to pass it. Health care is not that important to the market, but that the lack of unity on this issue puts the entire Republican agenda in jeopardy. The post-election stock market rally was built on expectations of tax cuts and today’s legislative logjam is not the narrative the market was hoping for.

The question traders have to answer is if today’s weakness is the first hints of a much larger selloff. Or if this is simply another dip on our way higher. On the surface these headlines don’t seem any worse than the ones the market brushed off previously. Brexit? So what. Rate hike? Who cares. Special investigator looking into the president’s administration? No big deal. If the market didn’t care about those things, why should it care about this health care vote? In fact this isn’t even the first time a health care bill failed to pass. The House stumbled several times before they finally passed their version of Trumpcare. There is no reason to think the Senate won’t be able to do the same.

Most likely today’s weakness will turn out to be a false alarm. Traders have been burned countless times every time they defensively sold weakness, only to see the market rebound even higher not long after they bailed out. It’s gotten to the point where so few people are selling headlines that dips barely last more than a few hours and go further than a handful of points. Right or wrong, headlines no longer matter if people stop selling them. Without supply, it is hard for any dip to build momentum. And that has been the story of this half-full market. No matter what the headlines have been, traders assumed everything will turn out fine and to this point that has been the right call.

As a trader I love a little uncertainty and volatility. These create great trading opportunities because someone else’s fear becomes my payday. Unfortunately this has been a painfully boring market and I don’t think today’s headlines changes that. I fully believe this market is skating on thin ice, but this isn’t the headline that is going to take us under. The market will continue to give our politicians the benefit of doubt and Tuesday’s botched vote will be forgotten by Thursday. If we find support Wednesday, the selloff is done and we can go back to our summer naps. I wouldn’t be concerned until this market crashes through 2,400 support and keeps going. But even then I still think it is simply creating a larger buyable dip. Trends continue countless times, but they only reverse once. Fight this bull at your own risk.

Jani

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Why nothing matters to this market

By Jani Ziedins | End of Day Analysis

End of Day Analysis:

The S&P500 rebounded from Friday’s early selloff and finds itself right back near all-time highs. Anyone who sold Friday’s dip is kicking themselves for overreacting to that weakness. If they were paying attention to the way this market has been behaving, they would have known better and not made that mistake.

Last Thursday I wrote:

“While this market makes me nervous, the path of least resistance is clearly higher. If we were vulnerable to a crash, it would have happened by now. There have been plenty of excuses for traders to sell defensively. But when no one sells the headlines, they stop mattering. These things rarely end well, but they also last longer and go higher than anyone expects. I don’t trust this market, but it will most likely continue creeping higher for the foreseeable future.”

A few hours the market “crashed” in one of the biggest dips in nearly a month, but that was clearly a place to be buying the dip, not selling the weakness. To be honest, I cannot even remember what traders were so spooked over Friday morning it was that trivial. If interest rate hikes, a presidential scandal, and the U.K. government in disarray didn’t bother the market, why should some nominal headline Friday morning make a difference? And a few hours later, it turned out those headlines didn’t matter and we find ourselves right back near the highs.

Risk is a function of height, meaning this is the riskiest the market been in quite some time. But just like skating on thin ice, it’s only dangerous if you fall through. Right now the market continue skating on thin ice without a care in the world. The path of least resistance remains higher…….until it doesn’t.

While I’m skeptical of this market and don’t trust it, it will keep going higher until is has a good reason not to. So far it has refused every reason we’ve thrown at it. That’s because this market is built on high hopes for generous tax cuts. At this point it is clear nothing else matters. The market doesn’t care that a special counsel has been appointed to investigate our preside. That doesn’t have anything to do with tax cuts, so it doesn’t matter…..right?

But if this market is built on a foundation of tax cuts, that is also the thing we are most vulnerable to. If the Republican coalition in Congress devolves into party infighting, or this looming Russia/Trump scandal erodes all of the president’s political capital, expect this market to give back a big chunk of the post-election gains. At this point that is the only thing that will kill this rally. But until this happens, enjoy the slow glide higher and ignore all the other noise along the way.

Clearly this is a buy-and-hold market. Anyone trying to trade this crap is getting their ass kicked. Traditional breakout and breakdown signals mislead us when they fail hours later. The only trade to make is either sticking stocks, or staying in cash. Anyone trying to outsmart this market by jumping in and out is doing nothing but accumulating losses. There are trading markets and there are buy-and-hold markets. This is definitely a buy-and-hold. But don’t despair. This won’t last long and great trading opportunities will come to those who are patient enough to wait for them.

Jani

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Is anyone paying attention?

By Jani Ziedins | End of Day Analysis

End of Day Update:

It was an exciting day for politics on both sides of the pond. We started the day with a General Election in the U.K. and capped it off with Comey’s testimony before a Senate committee. These two events were widely anticipated by pundits and news junkies for weeks. But it seems someone forgot to send the memo to the stock market. Given the market’s tepid, almost boring price-action, it looked like any other boring summer trading session.

Luckily for us boring is a good thing. It means traders are calm and not overreacting to headlines. Rather than sell nervously ahead of uncertain events, most traders are confidently assuming everything will blow over and this isn’t worth worrying about.

It’s easy to see why the market shifted to this half-full outlook. Every defensive sell over the last few years was a painful mistake. After getting burned three, four, and five times by prematurely selling a dip, traders learned their lesson and now confidently hold any and every dip because it will bounce like all the others before it. And so far that strategy has worked brilliantly. In fact the lack of defensive selling has gotten to the point that dips are measured in hours and tenths of a percent. Blink and you’ll miss them.

I miss the old volatility. I made a lot of money buying steep discounts from traders overreacting to headlines. People would dump their stocks “before things got worse”, but typically that was as bad as it got and we rebounded when things turned out less-bad than feared. But these days it is hard to find bargains when traders are demanding premium prices for uncertain times.

It was easy and safe to buy a dip when the market overreacted. Risk is a function of height and the lower we went, the less room there was left to fall. Buying at $80 is always less risky than buying at $100. But the opposite is true here. Long gone are the days of buying at $80, or even $100. Instead sellers are demanding $120 for an imperfect product. Good for them if they can sell at $120, but the thing is most are greedily holding for even higher prices. Their confidence is keeping supply tight and propping up prices, but these premium prices mean there is far less margin for error. We’ve gotten to the point where need to hit the ball out of the part just to keep this rally alive.

While this market makes me nervous, the path of least resistance is clearly higher. If we were vulnerable to a crash, it would have happened by now. There have been plenty of excuses for traders to sell defensively. But when no one sells the headlines, they stop mattering. These things rarely end well, but they also last longer and go higher than anyone expects. I don’t trust this market, but it will most likely continue creeping higher for the foreseeable future.

This post-election rally was built on expectations of tax cuts. Nothing else matters. Corporate tax cuts, repatriation of overseas profits, more money in consumers’ pockets. That is what propelled us from the November lows. But expectations are high. Maybe a little too high. What happens if Trump and Republicans fail to deliver on their generous promises? It won’t be pretty. Right now the stock market is giving the benefit of doubt to Trump and the Republicans. But there is a good chance the tax cuts won’t be as impressive as hoped for and we will stumble into a sell-the-news dip. Tax cuts are what got us to these heights and they are also one of the few things that can knock us off this perch. Keep riding these waves higher over the near-term, but bailout as soon doubt about the size of the tax cuts starts to creep in.

Jani

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Are things a little too good?

By Jani Ziedins | End of Day Analysis

End of Day Update:

The S&P500 finished lower for a second day, but the losses were minor and we are still well above the 2,400 breakout. The lack of material selling tells us most owners are more inclined to keep holding for higher prices than taking profits. Even though there are several ominous headlines floating about, it doesn’t matter if no one is selling the news. While conventional wisdom tells us markets are complacent just before they collapse, what conventional wisdom often forgets is those periods of complacency last far longer than anyone expects. The path of least resistance definitely remains higher, but expect the rate of gains to remain slow. While confident owners keep supply tight, we are running out of people willing to throw new money at these record highs and that is keeping a lid on prices.

Just because the path of least resistance remains higher doesn’t mean we shouldn’t be shifting to a defensive mindset. Even though I expect prices to continue rising over the near-term, we have never been closer to the market’s top. It’s been a great ride since the 2009 Financial Crisis bottom and I’ve been long-term bullish the entire time. As the saying goes, be greedy when others are fearful. Up until last year the market was afraid of its own shadow and traders thought every bump in the road was leading to the next market crash.

But eight years later, those traumatic memories are fading and being replaced with fear of being left behind. Starting last year the market experienced a major shift in sentiment as we went from a nervous, half-full outlook to this confident, half-full assumption that everything will turn out alright. Long gone are the fears that a Fed taper or interest rate hike would derail this market. Instead we have gotten to the point where the market is fairly blaze about an investigation into our president that could end in impeachment. While I agree the chances of this outcomes is remote, the consequences will be catastrophic for a market that is built entirely on Trump’s promised tax cuts.

It isn’t hard to see why most traders shifted to this half-full mindset. Every defensive sale over the last eight-years was a mistake because the prices rebounded even higher a short time later. After the third, fourth, and fifth time of feeling stupid by selling prematurely, traders learned it is best to hold through these periods of uncertainty and spooky price-action. And so far every trader who has become patient and confident has been rewarded as we climbed to record high after record high. It has gotten to the point where almost no one is reacting to headlines anymore. Rate hikes are no big deal. Missing employment expectations is met with a yawn. Heck, this cynical market finished in the green following the latest terrorist attack. Even a scandal that threatens to derail the Trump administration was hardly good for more than 24-hours of selling. Traders have been conditioned to hold through every dip and as a result no one is selling ominous headlines. The lack of supply means we stopped dipping at all.

While this complacency makes me nervous, I know it is foolish to call a top. This will go higher and longer than even the bulls think possible. The thing is this isn’t about predicting a top but finding good enough. To recognize the risk/reward is no longer stacked in our favor. That this is a better place to be taking profits than adding new positions.

I’m certain this market will keep going higher over the near-term, but I doubt this is the last time the market will trade at these levels. I don’t know when or why the next bear market will happen, but it isn’t unreasonable to expect our next bear market to cut 30% out of the market. That means even if we rally another 1,000 points and peaks above 3,400, we could still find ourselves tumbling back to these levels. The key isn’t about picking the top, but finding a level that is good enough, taking profits, and waiting for a better entry point. It is impossible to buy a dip if we are fully invested and ride our positions all the way down.

The post-election rally is built entirely on expectations of tax cuts. The market has been more than willing to give benefit-of-doubt to Trump and the GOP, but if they fail to deliver, expect the market to give back a huge portion of those gains. Given the high prices and low implied volatility, this might not be a bad place to look at a black swan trade. Buy longer-dated, out-of-the-money puts. While they will most likely expire worthless, the costs are relatively low and the payoff is huge if things turn out worse than the market is hoping for.

Jani

How to trade the Trump volatility

By Jani Ziedins | End of Day Analysis

End of Day Update:

On Thursday the S&P500 recovered a portion of Wednesday’s big crash. It was comforting to see the selling take a break as the supply of nervous sellers dried up. One day is certainly not enough to call this a bottom, but this is definitely a step in the right direction.

The turmoil started Tuesday night when a memo surfaced alleging Trump pressured the FBI director to drop the investigation of a former member of his administration. This ultimately resulted in the appointment of a special counsel to investigate the Trump White House. At best this is a huge distraction that will affect Trump’s ability to govern. At worst it could lead to his impeachment.

To this point the market has largely ignored the Trump circus, but this SNAFU poses the largest threat to the Republican’s tax cut and regulatory reform agenda. Since this is the foundation of the post-election rally, anything that threatens it also puts recent gains in jeopardy.

So far Trump has not been accused of doing anything illegal. This leaves the odds of impeachment low, especially in a Republican controlled congress. But Trump’s political capital is quickly evaporating. Lucky for him the Republicans in Congress share many of his same goals. While Trump might not get his Wall and the tax cuts might not look like what he proposed, Congress will still put bills on his desk and he will sign them. This continues to be the most likely outcome and after this brief bout of anxiety, the market will come to this realization too. That is why today’s selling took a break. Most likely this is nothing but a blip on our way higher.

That said, we might not have seen the bottom of this dip just yet. These things usually last more than one day and it is definitely premature to call the pullback over. If we were truly oversold, we would have seen a more decisive rebound Thursday. Instead we bounced a little bit and then mostly traded sideways through the remainder of the day. That tells us a lot of traders were not read to jump onboard the rebound.

Trading-wise we need to see the market hold Wednesday’s lows for a couple more days. If we don’t get a second leg lower by Monday morning, then this selloff is dead and we can start looking for the next trade. But if prices slip Friday morning and undercut Wednesday’s lows, expect that to trigger another wave of reflexive defensive selling. But rather than be the start of something bigger, this will most likely be the last push lower before a capitulation bottom. This would be a better place to be buying stocks than selling. Remember, risk is a function of height. This is the lowest prices have been in months making this is the safest time to buy in a while. Remember, we make money buying discounts, not paying premiums.

Jani

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Why today’s selloff failed

By Jani Ziedins | End of Day Analysis

End of Day Update:

Thursday provided a dramatic ride for the S&P500. We started the day with the biggest losses in several weeks. Within minutes of the open we undercut 2,390 support and that triggered a wave of reactionary stop-loss selling. But just as quickly as the selloff started, the rush for the exits stalled and we bottomed near 2,380 support. And just like that, the selloff was over and we spent the rest of the day climbing out of that hole. While we didn’t quite reach breakeven, the intraday reversal was impressive and told us most owners continue to believe in this market and won’t be spooked out so easily.

The biggest headline continues to be Trump’s dismissal of the FBI director. While the media is making a huge deal out of it, the stock market doesn’t care that much. Even at today’s lowest point, we were still within 1% of all-time highs. Hard to call such a small blip panicked selling.

While it felt awful in the moment, all selloffs feel that way. If they didn’t, no one would sell and we wouldn’t dip in the first place. But given how quickly we bounced off the lows, that tells us few owners were spooked by this price-action. Most owners have been rewarded by patiently waiting for higher prices and every bounce makes it easier to hold through the next dip. This confidence is infectious and the VIX is hovering just above all-time lows as traders continue to believe in this market’s strength. While it is easy to claim this market is too complacent, the harder part is figuring out when that complacency will become a problem. At the moment complacency is keeping supply tight because owners are not selling and that is propping up prices. While this might be the calm before the storm, the calm can last for an extended period of time. It is good to be cautious, but shorting just because the market is complacent is costing a lot of smart people a lot of money.

Expect prices to be resilient as long as owners remain confident. Until some headline comes across that makes the crowd start second-guessing their optimistic outlook, expect every dip to keep bouncing. Even though the market is vulnerable with so many people standing on one side, we need a significant event to trigger the panic. Until then the smart money is sticking with the rally.

Jani

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Should we fear this complacency?

By Jani Ziedins | End of Day Analysis

End of Day Analysis

The S&P500 poked its head above 2,400 resistance in early trade for a second consecutive morning, but just like Monday, we were unable to hold those highs on Tuesday. But before we get too pessimistic, both the gains and losses were small and mostly insignificant, measuring only a handful of points in either direction. While 2,400 has been a ceiling for the last few weeks, few traders were enthusiastically buying this breakout and that lack of demand is keeping a lid on prices.

On April 27th I wrote in my free blog:

Currently we are at the upper end of the trading range, meaning this is a better place to be taking profits than adding new positions. The longer we hold near these highs, the more likely it is we will break through 2,400 resistance, but without a substantive headline driving the breakout, expect the buying to fizzle and prices to tumble back into the heart of the trading range.

And so far this is exactly how things have played out. Stubbornly confident owners are keeping supply tight and propping up prices, but new money isn’t willing to chase prices higher and the breakout fizzled. But that was then, and this is now. What people really want to know is what comes next.

The post-election rally has been built on the back of expected tax cuts. We came a long way in anticipation of these cuts, but now we are getting to the point where traders need to see our politicians start delivering on their campaign promises before they will push prices any higher. Confident owners are keeping supply tight, but new money is no longer willing to push us any higher.

It is tempting to point to the record low VIX and claim this market is complacent. And I don’t disagree, this market is incredibly complacent. But the thing about complacency is it can persist for long periods of time. If confident owners haven’t sold any of the bearish headlines and price-action over the last several months, why are they going to start selling now? The simple answer is they won’t. Not until they have a good reason to change their mind. This bull market will die like every other one before it, but it needs something more than complacency to take it down and right now we don’t have that.

Markets like symmetry. We find ourselves in a very unemotional period, meaning traders on both sides are not very engaged in this market. We go up a few points, we go down a few points. No one is getting too excited in either direction. Even though the market is stalling at 2,400 resistance, we shouldn’t expect prices to tumble from here. Instead look for a pullback that matches the intensity with which we broke out. A few points higher and a few points lower.

Unfortunately for us traders, it is hard to profit from these small moves. But that is the way this goes. Sometimes we have great opportunities, other times not so much. It turns out this is one of those not so much times. But don’t despair, good trades are never far away. I don’t know what and when the next market moving event will be, but I do know it is coming. The challenge is for us to resist the temptation to over-trade this sideways chop and give back our hard-earned profits. Long-term success in the market doesn’t come from our winners, but minimizing our losers. It is easy to make money, the hard part is keeping it.

Jani

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Near all-time highs, what happens next

By Jani Ziedins | End of Day Analysis

End of Day Analysis:

The S&P500 stalled at 2,400 resistance Thursday, ending an impressive streak of gains that kicked off the week. Investors cheered the positive result from the French elections, but after the initial euphoria faded, there wasn’t enough substance behind the headlines to justify buying above recent highs.

As I wrote in Tuesday’s free blog post “the thing about “not-bad” news (the French elections) is it doesn’t do anything to improve corporate earnings in the U.S. We experienced a brief period of relief this week when we avoided a worst-case scenario, but now that we traversed those waters, we are largely left where we were a couple of weeks ago. We remain near the highs as hope for tax and regulatory reform remains high, but we are still waiting for Trump and the GOP to deliver on those promises. We couldn’t break through 2,400 in March and not much has changed since then.” And up to this point, the market is reacting exactly as I expected.

Now that we are at the upper end of the trading range, we need something new to keep this going. The Trump administration unveiled “the biggest tax cut in U.S. history”, but the market didn’t react because there is zero chance he will get this by Democrats and fiscally conservative Republicans. While 15% tax rates make a great soundbite, he might as well be promising the moon because neither one is going to happen.

Right now the market is trading in opposite world. Meaning it does the opposite of what conventional wisdom says it should do. Rather than selling a violation of support, we should buy it. Instead of buying the breakout, we sell it. When it feels like the market is about to collapse, buy. If everything is right in the world, sell.

The reason traditional rules do not work is because the wider crowd of investors is not joining these directional moves. Overactive day-traders jump from one extreme to the other and cause these daily gyrations, but when the wider group of investors doesn’t join in, the move fails and reverses. As long as the larger group of bulls and bears remain stubbornly attached to their outlook, we shouldn’t expect these directional moves to take hold. Instead, keep buying weakness and selling strength.

Currently we are at the upper end of the trading range, meaning this is a better place to be taking profits than adding new positions. The longer we hold near these highs, the more likely it is we will break through 2,400 resistance, but without a substantive headline driving the breakout, expect the buying to fizzle and prices to tumble back into the heart of the trading range. At this point the only thing that will support sustainable breakout is the GOP getting their act together and coming up with a passable tax plan. Until then expect us to stay in this trading range and keep selling strength and buying weakness.

Jani

Are Bulls Wrong this Week?

By Jani Ziedins | End of Day Analysis

End of Day Update:

The S&P500 added to recent gains Tuesday and is within a few points of all-time highs. This is a long way from the anxiety and uncertainty traders felt last week. In my April 18th free blog post, “Don’t Let the Bears Scare You”, I wrote that weakness was “a better place to be buying stocks than selling them”. Given this week’s strong performance, that was definitely the prudent trade. While it feels good to pat ourselves on the back, the most important trade is always the next trade. Now that we returned to the highs, everyone wants to know what comes next?

The first thing we need to analyze is what brought out of last week’s doldrums. This rebound kicked into overdrive Monday when the French election went according to the market’s plan. While it was nice to eliminate this risk factor, “not-bad” news is a lot different than good news. The market would have been upset if two anti-EU candidate’s made the final round, but for what seems like the first time this year, a moderate is the clear front-runner.

But the thing about “not-bad” news is it doesn’t do anything to improve corporate earnings in the U.S. We experienced a brief period of relief this week when we avoided a worst-case scenario, but now that we traversed those waters, we are largely left where we were a couple of weeks ago. We remain near the highs as hope for tax and regulatory reform remains high, but we are still waiting for Trump and the GOP to deliver on those promises. We couldn’t break through 2,400 in March and not much has changed since then.

The next bogie on the horizon is Congress passing a federal budget. Even though the GOP controls the government, they have been unable to use their strength effectively. Last month they failed to repeal Obamacare and right now it looks like they are on the verge of screwing up even simple procedures. If the GOP cannot agree on the budget, then that endangers even more important things like tax reform.

Most traders know market trade sideways more often than they rally or pullback. But we often forget that in the heat of battle. When prices are falling, we assume they will keep falling. When we rebound, we assume prices will keep rallying. But most of the time these periods of strength fizzle and bouts of weakness rebound. While most investors feel a lot better than they did last week, we should assume we will stay inside this trading range until something more meaningful happens. Just like how last week was a buying opportunity, this week we should be selling this strength. Expect us to remain rangebound until tax reform either passes or dies. Until then keep buying weakness and selling strength.

Jani

Don’t Let the Bears Scare You

By Jani Ziedins | End of Day Analysis

End of Day Analysis:

The S&P500 slipped for the fourth day out of the last five trading sessions. This time we were brought down when the British Prime Minister shocked everyone by announcing snap election in a few weeks. That launched the pound higher while punishing the export heavy London stock market. This weakness carried over to our shores, but to a far lesser extent since we only lost 0.3% as compared to the FTSE’s 2.5% drubbing.

My last free blog post was nearly a week ago when I wrote how this was a buyable dip. At that point we had been down for six sessions over the previous two weeks. It didn’t get much better since then because almost every day over the last week has ended in the red. Given the huge number of down-days over the last few weeks, you would expect stocks to be dramatically lower. But that’s hardly the case. After more than six-weeks of selling, the best bears can manage is a 2.2% dip from all-time highs! That hardly seems like something to worry about.

I’ve been trading for nearly two decades and the one thing I can tell you is market crashes are breathtakingly fast. They happen so quickly most traders don’t have the time to react, let alone understand what is going on. The “selloff” we find ourselves in middle of is the exact opposite. It is happening so slowly it is almost painful to watch. If stocks crash from unsustainable levels quickly, holding near the highs for nearly two months tells us this is a constructive consolidation, not the verge of a collapse.

If we need further evidence, the healthcare bill blew up a few weeks ago. Today the Brit’s interjected more political uncertainty by calling for new elections. Over the last month we’ve seen negative technical price-action pile up as we undercut key price levels and moving averages. But to this point none of the headlines or weak trading has been able to trigger follow-on selling. Instead of being spooked, confident owners are staying confident. When confident owners don’t sell, supply stays tight and prices remain firm. Say what you want about the underlying fundamentals, but it is really hard for a selloff to take hold when no one is selling.

One of the most profitable ways I’ve found to analyze the market is asking myself “what is the market not doing?” Right now the market is definitely not selling off. We have had wave after wave of bearish headlines and so far every violation of support is met with dip-buying, not emotional herd selling. We have been given countless excuses to implode, but the market is clearly not interested in taking the bait. Countless bloody noses have taught me market’s don’t give us this long to sell the top. If that is the case here, that means this cannot be the top.

If this market doesn’t want to go down, that makes this a better place to be buying stocks than selling them. That said, I don’t believe this market is poised to rip higher either. Markets love symmetry and this 2% dip will likely be met with an equally uninspiring rebound. Expect the S&P500 to stay 2,300/2,400 range-bound until further notice. Nimble traders can trade the swings inside this range, but longer-term investors should stick with their positions and ignore this noise.

Jani

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Why it is okay to keep buying the dip.

By Jani Ziedins | End of Day Analysis

End of Day Update:

The S&P500 slipped for the sixth-time over the last two-weeks and finds itself under the 50dma. But as bad as this sounds, this “selloff” hasn’t even given up one-percent over this period. The reason we slipped under the 50dma is because it came up to meet us, not that we dipped down to find it. Clearly the Trump Trade is cooling off, but this is hardly panic material.

The interesting thing is the mood in the market has changed from unbridled optimism to reservation and caution. Trump’s had his share of missteps, the health care repeal blew up, and there is simmering tension with Russia, Syria, and North Korea. Add to this the negative price-action we’ve seen recently and the market has plenty of excuses to sell off. That leaves us with the question, why is this dip so modest?

One of the most useful ways I found for analyzing the market is looking at what it is NOT doing. We have all the excuses I listed, plus we can add “too-high, too-fast” and stretched valuations to the list too. With all of these reasons, why aren’t we dramatically lower? Why aren’t more people selling and taking profits? Why isn’t anyone panicking?

When we ask, “what is the market not doing?” Clearly it’s not selling off in a meaningful way. While some people will tell us to be patient, one of the things I learned during my two-decades in the market is big selloffs are breathtakingly fast. They happen before you know what hit you. Not this slow motion stuff we find ourselves in the middle of. If we were extended and vulnerable to a breakdown, it would have happened by now.

No matter how good the reasons the bears have, it doesn’t matter when owners refuse to sell. As long as stubbornly confident owners continue keeping supply tight, the market will keep finding support and defying the skeptics. Clearly this cannot last forever, but it will last far longer than anyone thinks possible.

This market will crack and break down because every bull market eventually ends, but we are not there yet. As long as these dips fail to attract follow-on selling, expect them to be modest and bounce. That means this is a better place to be buying stocks than selling them. As long as we keep recycling the same old headlines, we don’t have anything to worry about. If the healthcare dud and launching missiles at Syria didn’t faze owners, it is hard to imagine a headline that will convince them to change their mind.

Over the near-term I will keep buying the dip, but I will keep an eye out for that new and unexpected headline that sends chills through this market. That will be the one we have to watch out for. But until then approach this rangebound market by buying weakness and selling strength.

Jani

Death of a Bull, or Another Buyable Dip?

By Jani Ziedins | End of Day Analysis

End of Day Update:

It was a wild ride for the S&P500 as respectable gains evaporated in a late-day selloff. The Fed’s meeting minutes poured cold water on the market when they told us the easy-money party was coming to an end. Many people believe the Fed’s aggressive bond buying program inflated this market and now the Fed is telling us they plan on shrinking their enormous balance sheet later this year. While today’s dramatic reversal on elevated volume was noteworthy in of itself, the bigger question is if this is just another buyable dip like all the others before it, or if this is a true turning point that represents a fundamental change in the market’s outlook.

The market clearly didn’t like today’s news and that’s what lead to the largest intraday reversal in quite some time. But for this to represent a real change, this needs to be a new and unexpected development. Something that caught optimistic owners by surprise and will finally be the catalyst that causes them to give up hope and sell.

Personally I didn’t find this revelation all that surprising. The Fed told us they were going to boost interest rates and that’s what they’ve been doing. So far stocks have brushed off the last three rate-hikes and we continue hovering near all-time highs. Shrinking the balance sheet is the next logical step in the return to normalized monetary policy. It’s been eight-years since the depths of the financial crisis and the economy has proved itself far more resilient than most expected. While equity owners would love to keep the money printing presses running full-tilt, we find ourselves at a point where the risks outweigh the rewards.

If I knew this was coming, was it a surprise to you? If it doesn’t seem like a big deal to either of us, should we really expect this to send a chill through the market? The current crop of owners is stubbornly confident. Every other dip this year bounced because owners refused to sell. Do we think this headline is so shocking and unexpected that it will turn these stubbornly confident owners into fearful sellers? I doubt it. And there’s our answer. Today’s news doesn’t change anything. Stubbornly confident owners will remain stubbornly confident and this dip will bounce like all the other ones before it. No matter what the market “should” do, when people don’t sell, supply stays tight and prices resilient. Something will break this market eventually, but this isn’t it.

As a trade, I would give this reversal a little time to work its way through the system. These things are rarely one-day events, but I would be buying this weakness, not selling it.

Jani

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Common Sense Part II

By Jani Ziedins | End of Day Analysis

End of Day Update

The S&P500 experienced its first one percent loss since October. This came as quite the shock for those that assumed the Trump trade would take us to the moon. But it was little surprise for those of us that have been doing this for a while. Many people will claim they saw this was coming, but the following is what I wrote the day S&P500 exploded to record highs following Trump’s first address to Congress and when Trump mania reached a fever pitch:

While owners feel good and comfortable with their positions, we really should be asking ourselves if this is a better place to be adding new positions or taking profits. Risk is a function of height and by that measure this is the riskiest the market has been in quite some time. Momentum is clearly higher and will likely continue, but I feel much safer buying discounts than paying a premium. It is simply a matter of risk versus reward. This breakout carried us to record highs and has already moved us 15% above the November lows. While we can keep drifting higher, what are the odds we rally another five, ten, or fifteen percent? With history as our guide, a near-term dip is more likely than a continuation. As we started with, markets move in waves. You know it, I know it, everyone knows it. Unfortunately many in the crowd have temporarily forgotten it.

And given today’s meltdown, we now we find ourselves in the midst of this expected pullback. The more pressing question is if this the start of a major correction, or just a routine two-steps forward, one-step back?

The excuse for today’s selloff was the failure of a Republican controlled Congress to quickly reach a deal on repealing Obamacare. The thinking goes that if they cannot get their ducks in a row on Obamacare, then the much more important tax reform is also in jeopardy. But the thing to remember is this is how politics works. As the saying goes, there are two things you don’t want to know how they are made, sausages and laws. This is an ugly and drawn out process. Just because Representatives claim they won’t support this bill doesn’t mean they won’t support a bill. This is how negotiations work in politics. Grind the process to a halt, get concessions for your constituents, and then let everything proceed. If our politicians were not doing this, they wouldn’t be doing their job.

So if this is the way politics always works, should we really be worried that the repeal of Obamacare and Tax Reform are dead? No of course not, that is just as ridiculous as assuming the Trump trade was taking us to the moon. Today’s pullback is normal, routine, and most importantly buyable. But the thing to remember about buyable dips is they wouldn’t happen unless they felt real. If everyone knew it was a buyable dip, no one would sell and we wouldn’t dip in the first place. Of course this feels real and of course it is scary. Every buyable dip feels this way.

The challenge isn’t knowing if we will bounce, but when. Most owners have been confidently holding for higher prices despite concerning headlines and price-action. Are today’s headlines likely to change their mind after they stood their ground through far more bearish headlines? No probably not. That means we should expect this selloff to run out of supply soon and rebound back into the heart of the trading range. What happens after that is an entirely different debate, but at the moment this is a better place to be buying equities than selling them.

The one exception is if we stumble across truly unsettling news that shifts the market back into a half-empty outlook. That said, today’s headlines are definitely not that. Repealing Obamacare is not dead. Tax cuts are not dead. Reducing regulation is not dead. This is simply a process and that takes longer than the stock market was hoping for. The great thing for us is these discounts create profit opportunities for those that are willing to take them.

Jani

What is Sentiment Telling Us?

By Jani Ziedins | End of Day Analysis

End of Day Analysis

The S&P500 continues hovering above 2,360 while oil fell under $50 for the first time this year. The last few weeks of enthusiasm is crumbling and giving way to second thoughts. This shift is clearly evident in popular sentiment measures. The StockTwits’ $SPY stream plunged from 60% bullishness last week to 40% today. AAII’s weekly sentiment survey saw bearishness spike nearly 11% and is at the highest level since the election. Given how dramatically sentiment changed, surely it must have been a painful week for stocks. While we slipped almost every day since last Wednesday’s record high, the losses have been relatively trivial and we are down little more than 1% from last week’s all-time high. Clearly something is askew and as traders it is our job to figure out who is right, the resilient market, or the increasingly pessimistic crowd.

When all else is equal, we always give the benefit of doubt to the market. While it is not always right, it is far larger than we are and will run over us if we get in its way. One of the most useful techniques I found for analyzing the market is focusing on what it is not doing. This is typically far more insightful than trying to guess at what it is doing and why it is doing it.

This week’s dramatic swing in sentiment tells us the crowd thinks stocks went too-far and are vulnerable to a pullback. I can relate because that is exactly what I was expecting last week too. But here’s the rub, we haven’t pulled back very far after a week of selling. As I often write, breakdowns from unsustainable levels are breathtakingly fast. The market rarely gives us this much warning before crushing us. Jumping back to the “what is the market not doing?” view of the market, the obvious answer is it is not crashing. When the market isn’t doing what the crowd expects, that means it is setting up to do the opposite. While I’m not ready to predict another strong move higher, at this point that is far more likely than the widely feared imminent collapse. That means we should be looking for dips to buy, not selling stocks and adding shorts.

Jani

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A Common Sense Reminder

By Jani Ziedins | End of Day Analysis

End of Day Update:

The S&P500 surged to fresh highs in the biggest up-day since the election. Trump addressed Congress Tuesday night and clearly the stock market liked what it heard. Today’s move caps a 15% rally since the November lows. It’s been a great ride, but the pressing question is if it is time to get off, or if this thing has a lot further to run?

Let’s start with the basics, everyone knows the market moves in waves. Most traders acknowledge even the strongest markets move two-steps forward, one-step back. While we cognitively recognize this, we often forget it in the heat of battle. Human nature compels us to find patterns and extrapolate those patterns far into the future. This behavior worked well when it came to surviving in the wild, but many of these instincts are a liability in the financial markets.

Traders are excited, everyone is making money, and it is hard to resist the crowd’s enthusiasm. Everyone else is making money and we want to join the party. It is perfectly natural to feel nervous when everyone around us is nervous and relaxed when everyone else is relaxed. When a lion entered a camp, those that automatically ran when everyone else was running survived while those that waited to see what the fuss was about quickly became lunch. We’re pack animals by instinct. Rather than fight it, just recognize it and factor it into our trading decisions.

And this brings us back to the current market. We surged 15% in four-months with only the smallest dips along the way. Then today we experienced the largest single-day gain of the entire move. Let me ask the rational side of your brain, is today’s surge the start of a much steeper rally higher? Or is it more likely to be part of a near-term climax before a much needed pullback and consolidation?

Let’s just get this out of the way pullbacks are inevitable. It will happen because it always happens. The hard part is getting the timing right. Traders don’t get paid for knowing what will happen, they get paid for knowing when it will happen. And so the question isn’t if this breakout will stall and step-back, the question is when. Without a doubt this rate of gains is unsustainable. But the same thing could have been said yesterday, last week, or even last month. While I don’t know when we will peak, what I do know every day brings us one day closer.

While owners feel good and comfortable with their positions, we really should be asking ourselves if this is a better place to be adding new positions or taking profits. Risk is a function of height and by that measure this is the riskiest the market has been in quite some time. Momentum is clearly higher and will likely continue, but I feel much safer buying discounts than paying a premium. It is simply a matter of risk versus reward. This breakout carried us to record highs and has already moved us 15% above the November lows. While we can keep drifting higher, what are the odds we rally another five, ten, or fifteen percent? With history as our guide, a near-term dip is more likely than a continuation. As we started with, markets move in waves. You know it, I know it, everyone knows it. Unfortunately many in the crowd have temporarily forgotten it.

All of that said, we need a something to shake the confidence of stubborn owners. Something to get them to sell this market they are so excited about. Two bogies on the immediate horizon are the Fed’s interest rate decision and Republicans getting together to repeal Obamacare. If either of these don’t go the market’s way, that could be what gets traders to start looking down and realize how high they are and convince many to start taking profits.

Don’t get me wrong, I’m not a doom-and-gloom perma-bear. I’m simply being a realist. The biggest up-day in a nearly straight-up 15% move makes me nervous. Markets move in waves and it’s been some time since we took a step back. Be careful.

Jani

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Where we go from here

By Jani Ziedins | End of Day Analysis

End of Day Analysis:

The S&P500 snapped a seven-day win streak Thursday, but it is a stretch to call a 0.09% bump a meaningful loss, especially since we rebounded nicely off the intraday lows.

Looking at the chart it is obvious the recent rate of gains is unsustainable and today was finally the day we took a break. While there might be a little more upside left in this move, we are definitely closer to the end than the start. If a person is not already in the market, they are late to the party and should resist the urge to chase. Risk is a function of height and it is more dangerous to buy up here than it was before we broke out. Wait for the inevitable cooling off before rushing in. Institutional money hates chasing breakouts and we should follow their lead. If big money is holding back, in a bit of a self-fulfilling prophecy their lack of buying actually creates the dip they are waiting for. We should exercise the same restraint. As the saying goes, “It is better to miss the bus than get hit by the bus!”

It’s been a tough stretch for bears who were convinced the market was going to tumble from 2,300 resistance. Instead we broke through and surged 50-points. But that shouldn’t come as a surprise to regular readers of this blog.

I wrote on February 9th:

“the thing to remember is we tumble from unsustainable levels quickly. We have been hanging out near these record highs for two-months. If this market was fragile and vulnerable, we would have crashed a long time ago. There have been more than enough reasons for this market to selloff, yet every time it refuses the invitation and we run out of sellers. Say what you will about the fundamentals of this market, but when confident owners don’t sell bearish headlines and weak price-action, supply stays tight and prices remain resilient. If the sellers failed to materialize over the last eight-weeks, why would they show up now and sell far more benign headlines and price-action? That is the question every bear needs to answer. If it didn’t happen then, why is it going to happen now?”

Bears could have saved a lot of money if they used a little common sense, but that is that is a lesson to save for next time. Now that we are up here, the question is what happens next? As I already stated, the recent rate of gains is unsustainable, so at the very least expect the market to slow down. That doesn’t mean we are going to tumble, just that we need time to consolidate recent gains. As I wrote on February 9th, confident owners are ignoring all the reasons to distrust this market. Until we find something new and unexpected to shatter this calm, expect the bull market to remain resilient.

If we cool off, the nearest level of support is 2,320. That acted as resistance last Friday and we bounced off that level Monday and Tuesday. I would not expect a routine pullback to dip a lot further than that. Traders that missed the initial breakout can use this dip as a safer entry point.

Until something new and unexpected happens, expect this post-election drift higher to continue.

Jani

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