Category Archives for "End of Day Analysis"

PM: Another short-squeeze

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
Stocks staged an impressive rebound off the 50dma on restrained volume.  This was the second test of this widely followed moving average in the last couple weeks, but so far support is holding up.

MARKET SENTIMENT
Today’s gains caught shorts off guard as the obvious breakdown failed to breakdown.  When the market doesn’t act as expected, we must reconsider our entire investment thesis.  Bears are convinced this market is overly-bullish, but the contrarian trade isn’t about what we think, it’s about what other people think.  Bears made the mistake of assuming strong prices means everyone is bullish, but what they really need to do is stop talking about how overly-bullish this market is and start listening to what everyone else is saying.  When everyone says the market is overly-bullish, the exact opposite is true.  People still want to debate me on this, but the inability for this correction to maintain downside momentum is a clear testament to just how bearish this market already is.  The crowd was bearish, expected further weakness, sold ahead of it, there is no one left to sell, and we bounce on tight supply.  Pretty textbook contrarian trade.

TRADING OPPORTUNITIES
Expected Outcome:
Any weakness fizzles at support showing there are few holders willing to sell.  This keeps supply tight and prices strong.  Expect shorts to keep getting squeezed over coming days, but don’t get greedy and take profits in the upper half of the 1600s.  The market is likely entering a trading range between 1600 and 1700.  Buy weakness, sell strength.

Alternate Outcome:
Watch for a failure to hold support because this means we ran out of buyers.  This market will top like every one before it, so we must be prepared.

Trading Plan:
Holding above support gives us the green light to own this market, but only for a swing trade up to 1675.  If this market fails to hold 1600, that will finally be a valid short entry with a tight stop above 1600.

Plan your trade; trade your plan

PM: Weakness persists

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
Stocks gave up early gains and slipped to the 50dma on below average volume.

MARKET SENTIMENT
Holders were not rushing to sell as indicated by the low volume, meaning weakness was driven by lethargic demand.  Either we ran out of new buyers because everyone is fully invested, or prospective buyers are reluctant to buy this environment.  The 90-point slide from previous highs mitigated much of the over-bought conditions, making it unlikely the crowd is overly bullish and fully invested.  More likely this market suffers from reluctant demand due to pervasive expectation of further declines.

The biggest takeaway of the light volume is holders remain committed to this market and are not rushing for the exists at the first sign of trouble.  Crashes are driven by irrational panic and so far this selling is orderly and restrained.

TRADING OPPORTUNITIES
Expected Outcome:
We are still holding support and every dip remains buyable until we violate these key levels.  Orderly selling is a normal and healthy part of every rally.  Do not fear periodic weakness because it is how markets heads higher.  Traders remain on edge, but the longer we hold these levels, the more comfortable they will become, eventually leading to new buying.

Alternate Outcome:
I am just a few points away from being wrong.  While I still believe in this market, I must respect the price action.  We can easily break support and trigger an avalanche of stop-loss selling, sending us dramatically lower.  While still expect a bounce, I must honor my stops.  It is okay to be wrong, it is fatal to stay wrong.

Trading Plan:
We are at the lower end of the trading range making the market buyable with a tight stop under support.  A short should wait for the selloff to begin before picking a fight with this resilient bull.  And of course there is no reason to force a trade in this choppy market.  Often the best trade is cash.

Plan your trade; trade your plan

PM: Down one percent

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
The S&P500 ended down 1%, giving back Friday’s gains in average volume.  The market is still holding above minor support at 1620 and major support at 1600 and the 50dma.

MARKET SENTIMENT
While it felt dramatic, today’s dip did not do any major technical damage to the rebound.  Markets remain uncertain and that leads to volatility.  Yen and Nikki swings are putting the squeeze on major banks and hedge funds and that anxiety is rippling into our market.  It is unlikely turmoil in Japan will directly affect our economy, but it could influence where liquidity ends up.  Contrary to today’s move, instability over there can create renewed demand for US stocks and bonds as traders flee to our relative safety and stability.

TRADING OPPORTUNITIES
Expected Outcome:
Selling today is not a surprise.  The market is entering a consolidation phase following sizable gains and choppiness is part of that cathartic process.  Support and a bounce off 1620 on Wednesday is bullish.

Alternate Outcome:
Failing to hold 1620 and testing 1600 so soon after finding support is troubling and forces us to take a more defensive stance.

Trading Plan:
A bounce on Wednesday is buyable and a breakdown is a warning flag.  Stick to our stop-losses and don’t let recent profits turn into losses.  While the more adventurous can trade these swings, a more conservative trader can sit on recent profits and wait for a higher probability trade.  Making money in the markets is easy, the hard part is keeping it.  The best way to avoid giving back profits is to avoid forcing a trade where there is none.

AAPL daily at end of day

INDIVIDUAL STOCKS
AAPL‘s developer presentation on Monday failed to impress the market and the stock remains stuck at the 50dma.  Another catalyst came and went without reviving excitement in the company and its products.  Holding support this long is encouraging, but also sets the stage for an avalanche of stop-loss selling if we break through it.  Quick profits can be made here buying the breakout or shorting the breakdown.  Wait for the market to make its move and jump onboard with tight stop-losses.  But don’t hang on too long and take quick profits after a few days.  Since January AAPL’s been a trading stock and buying dips and selling strength is still the best way to play this name.

Plan your trade; trade your plan

PM: Constructive trade

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
Stocks traded flat on low volume, following last week’s decisive rebound from 1600 and the 50dma.

MARKET SENTIMENT
Following all the selling and subsequent rebound last week, everyone is standing around wondering what comes next.  Volume was light as few chose to trade, preferring to see what happens next, but this is bullish.  It shows holders are comfortable holding and no one is rushing to lock in profits or sell the bounce.  We have rallied the last six-months on tight supply and can continue doing it here.

The obvious top seems less obvious today.  We broke through key support at 1600 and the 50dma, but it failed to trigger a wider wave of selling.  We didn’t bounce because traders were complacent and rushed to buy the dip.  No it was quite the opposite, everyone expected the plunge as we were in the mist of the long-awaited correction.  Complacency and dip buying didn’t prevent the selloff; fear, panic, and a huge wave of selling ended it.  Once the pessimists and fearful were out or short, there was no one left to sell, supply dried up, and we popped.  Supply and demand at its most simple.

TRADING OPPORTUNITIES
Expected Outcome:
If this bounce is built on unsustainable dip-buying, it will fizzle Tuesday.  Anything that lasts at least four-days has wider buying behind it and is safer to own.  Last week squeezed many of the late shorts, but there is still an army of shorts holding on from higher up and hoping this bounce is a bull-trap.  Unfortunately for bears, they had the perfect setup to break this market last week and could not get the job done.  If a bear did not heed the warnings last week, there is still time.  It is okay to be wrong, it is fatal to stay wrong.

Alternate Outcome:
If the rebound collapses on Tuesday, it means this bounce was built on a foundation of sand and the selling is not done yet.  No matter what we think, we use stops to get us out of bad situations.  Failing to hold the 50dma or 1600 so soon after bouncing is not encouraging and shows bears gained the upper hand.

INDIVIDUAL STOCKS
AAPL’s early gains fizzled following their developers conference.  We have OS X 10.10, a fairly modest upgrade, but for me personally, the redesigned dual-monitor support is huge.  Apple barely supported dual-monitors since Snow Leopard and upset many of their professional users that carried the company in the pre-iPod days.  The new Mac Pro was also a nod to power users since many assumed the line was being discounted in favor of consumer grade computers.  The downside for investors is these power users don’t even add up to rounding errors on the income statement.

P at end of day

The big deal for average users is the completely redesigned iOS7 that finally moves the iPhone out of 2005.  It is still playing catchup to Android, but at least it isn’t as far behind.  But for AAPL investors, icon designs don’t drive phone sales, features do and expect AAPL to continue losing market share to cheaper and larger phones.  AAPL has a lock on expensive 4″ phones but that is because they are the only one selling $600 small screen phones.

iRadio is a joke, they even joked on stage that it was just like Pandora.  P spiked on the news of how little attention iRadio was getting and it seems more a novelty than anything that will drive sales or revenue.  At best it will drive a few iTunes sales, but they didn’t give any reason for people to change from Pandora or Spotify.

Plan your trade; trade your plan

PM: Another leg down

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
Stocks continue sliding, down three of the last four trading sessions and are 80-points off the high set a couple of weeks ago.  The market closed just above support at 1600, the 50-dma, and the lower trend-line of the uptrend.  Is this the place for another routine bounce off of support, or is this the start of something bigger?

MARKET SENTIMENT
What goes up must come down.  This is the pullback everyone was waiting for, but now they are scared and predicting market crashes.  This is how it usually goes, we hope and pray for something, but when it happens we are too afraid to act.  People who wanted the market to pullback so they could buy more, are panicking and selling with the crowd instead.  But that is the way it has to be.  If this were easy, everyone would be rich and we clearly know that’s not the case.

From here the market can do one of three things, bounce off of support at 1600, dip under 1600 and trigger one last wave of stop-loss selling before rebounding, or continue the relentless slide lower.  It really comes down to the dynamic between buyers and sellers.  Will we exhaust the supply of holders easily spooked into selling for a discount?  Will prices become so attractive value buyers can no longer resist?  Better or worse we will have our answer in a couple of days.

For all the talk of doom-and-gloom we are only 5% off all time highs.  Obviously every 50% collapse starts with that first 5%, but not every 5% pullback leads to a 50% collapse.

TRADING OPPORTUNITIES
Expected Outcome:
Stocks are still a few point above support and we must assume the market will bounce until it proves otherwise.  The challenge with trading technical levels is they are better drawn with a crayon than a straight edge.  Sometimes we bounce early, sometimes late.  Each trader needs to pick a stop-loss level that balances their tolerance for risk versus desire to avoid getting shaken out.

Even if the market is topping, expect either a doubt-top or saw-tooth decline with multiple short-squeezes and sucker’s rallies along the way.  Bull or bear, look for the market to bounce in the near future.  The only thing up for debate is how sustainable the subsequent rebound is.

The most encouraging thing about all this selling is it is pricing in the end of QE.  Once we work through this episode, we no longer need to worry about it.

Alternate Outcome:
Markets are notorious for overshooting on both the low and high side.  This market will pullback like everyone before it and this easily could be the start of that move.  If nothing else, use stop-losses as a last line of defense.

Trading Plan:
There is no reason we need to be in this market.  The mistake many traders make is feeling compelled to always have a trade on, but most of the time that is when they give back all their hard-earned profits.  Making money in the markets is easy, the hard part is keeping it.  The ambitious can look for a buyable bounce off of support on Thursday with a tight stop under recent lows.

Plan your trade; trade your plan

PM: What bulls?

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
Stocks closed in the red, but held yesterday’s low of 1622 and finished above the intraday lows. Volume was above average, but off of the elevated levels seen on Friday and yesterday.

MARKET SENTIMENT
Holding 1620 through Wednesday’s close shows sellers just don’t have what it takes to push this market any lower.  No matter what anyone says about too-far, too-fast, overbought, overly-bullish, etc, this market remains cautious, hesitant, even bearish.  The most common mistake people make is assuming the trend represents popular sentiment, but in fact they have it exactly backwards.  Sustained trends are only possible when the crowd expects the opposite will happen; overly-bearish markets rally and overly-bullish markets slide.

The only reason the current market rallied this long and far is because of how overly-bearish it was following Obama’s reelection and the impending Fiscal Cliff.  Even seven-months and 350-points later it refuses to breakdown because people still don’t trust it.  StockTwits maintains a sentiment indicator and right now users are 68% bearish and only 32% bullish.  That is anything but overly-bullish.  Over the last two-months the indicator has only been above 50% for a couple of days, yet the market rallied 150-points in that same period.  This market rallies because it is overly-bearish and as long as the cynics continue fighting it, it will keep going.

Source: StockTwits 5/4/2013

The silver lining to all this volatility due to speculation over the future of QE is this selling is removing that overhang.  The more scared the market is now, the less of a big deal it will be when it finally happens.  Everyone who fears QE ending is selling to buyers unafraid of it.  When QE finally ends the fraidy cats will be on the sidelines and the confident will continue holding.  Just another time to sell the rumor and buy the news.

TRADING OPPORTUNITIES
Expected Outcome:
Everything I see shows this market remains overly-bearish and the recent selling chased out weak holders.  With most of them out of the way, selling will dry up and the market will bounce.  Strength on Wednesday is buyable with a stop under 1620.

Alternate Outcome:
I’ve been wrong before and without a doubt I’ll be wrong again.  The goal isn’t to be right all the time, but to minimize the cost of being wrong.  If the market slips under 1620, expect a dip to support at 1600.  While we will assume every dip is buyable, failing to hold 1600 shows we need to reconsider the viability of the rally.

Plan your trade; trade your plan

PM: Where are the buyers?

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
It was a dramatic close on Friday.  We went from flat to down 1.4% in the last three-hours with losses accelerating into the close.  It was a 2% plunge from the morning highs and reminiscent of last Wednesday’s selloff.  Volume was above average between end of the month window-dressing and stops getting triggered as the selloff picked up speed.

MARKET SENTIMENT
Buying opportunity or continuation of last week’s selloff?  You’ll get different answers depending on who you talk to.

On the surface this looks like the selloff everyone’s been talking about and waiting for, but since when does the market do what everyone expects?  Clearly price has been on the bear’s side as we slipped nearly 60-points from recent highs.  This market rallied 150-points over five-weeks and everyone knows that is too-far, too-fast, so this correction is long overdue.  Hard to argue with the logic and subsequent price-action, but I’ll try.

This was a boring, holiday-week where the market hardly moved.  Trading floors were lightly staffed going into Friday’s close as those that actually worked this week cut out early.  Why stick around when nothing is happening, you are not going to buy anything, and automatic stop-losses will cover you incase the market breaks down?  Junior traders and computers have the authority to sell when the prices cross stops, but are not allowed to initiate new or add to existing positions.  This leads to moves like today’s close where stop-losses get triggered and no one is left to buy the dip.  There was no real news to justify the afternoon selling and it was simply a structural due to a cascade of stops getting triggered.

But we don’t have to speculate for very long.  If this was simply a matter of lightly staffed trading floors and auto-pilot selling, the market will effortlessly rebound next week.  If selling continues, there is more to this and the crowd might actually be right this time.

TRADING PLAN
Expected Outcome:
No matter what people say, we are still in a bull market and the odds are better trading with the trend than against it.  A day and swing-trader can take advantage of this volatility, but take profits quickly when going against the trend.  The uptrend remains intact even if we fall to 1600 and the 50dma and a bounce anytime between here and there is buyable.  If we fail to find support and continue under 1600 then we have to reevaluate our bullish thesis.

Alternate Outcome:
Every rally comes to a painful end and this one will be no different.  It is premature to call a top, but failing to make new highs and violating key support at 1600 shows buyers are scarce and further selling is likely.

Trading Plan:
Assume the market will bounce until proven otherwise.  Shorts should be taking profits, not initiating new positions.  Any rebound is buyable with a tight stop under the bounce’s low.  1600 is the key support and failing to hold this will force us to reevaluate our outlook.

GLD daily at end of day

INDIVIDUAL STOCKS
AAPL finished modestly in the red and is still solidly above the 50dma and $440 support.  I’m not sure how much upside there is but the stock acts like it wants to go higher in the near-term.

GLD had a poor close as the volatile trade continues.  It is not behaving like the lows are in and expect further declines in the near future.  Once upon a time gold would surge on market uncertainty, but it quickly shifted from safety to speculation and gets lumped in with every other asset dumped when people hit the panic button.

Plan your trade; trade your plan

PM: Buy the dip or short the bounce

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
Stocks bounced after three-days of selling.  Volume was average, but respectable following a three-day weekend.

MARKET SENTIMENT
A large chunk of Tuesday’s buying was driven by short covering as aggressive bears were forced to buy stock when the market bounced.    Short covering climaxed mid-morning and we retreated from the daily highs when follow-on buying failed to materialize.  The rally is sustainable if buyers remain nervous and hesitant, but is in trouble if we can’t find buyers because everyone is already in.

I posted Yahoo Finance surveys before and for the most part they were overwhelmingly bearish.  Today’s survey is the first cautiously bullish one I’ve seen in a while.  It shows 42% are buying stocks, but the majority, 58%, remain wary of this market.  If we are concerned about overly bullish markets, we are not there yet, but the recent rally continues eroding doubt and fear.

Source: Yahoo Finance 5/28/2013

Success doesn’t come from always being right, but recognizing and fixing mistakes early.  We can recover and even make money if we change sides soon after our original thesis proves invalid.  We lose a little initially, but after recognizing our mistake and updating our outlook, we start profiting from new information.  I grew cautious as we pushed to new highs in March and was bearish in April.  On April 18th when the market failed to break wide-open as expected, I was forced to throw my original thesis out the window because the bounce invalidated everything I believed.  It took a couple of days to work up the courage to buy the market in the 1570s, but that was the right call given the way the market was behaving.   It is okay to be wrong, but it is fatal to stay wrong.

TRADING OPPORTUNITIES
Expected Outcome:
Bears will use the retreat from the day’s highs to justify holding their shorts, but one thing is clear, downside momentum stalled and selling dried up.  We cannot sustain the rate of gains seen over the last few weeks indefinitely and a pause here is expected and healthy, not bearish.  Resist the seduction of  “too far, too fast” and learn to trust embrace an easy and highly profitable rally.

Alternate Outcome:
While the market looks good here, it is getting old and we need to prepare for the inevitable correction.  The higher these things go the harder they fall.  Signs we are running out of buyers is stalling short of recent highs and breaking support.  Until then stick with the rally.

Trading Plan:
As long as this market holds recent support at 1635 it remains buyable/holdable.  Shorter-term traders should use this as a trailing-stop.  More material support is back at 1600 and the 50dma.  Fail to hold either of these levels and the rally’s viability is in doubt.

TSLA at end of day

INDIVIDUAL STOCKS
AAPL lost ground, but is still above $440 and the 50dma.  It struggles finding buyers willing to push the stock higher, but these same buyers are willing to step in and prevent a further slide.  Support here is half-full/half-empty for bulls.  On one hand the stock is attracting value buyers willing to put a floor under $440, on the other it is attracting value buyers unwilling to buy above $440.  The increased dividend opens the stock up to a wider pool of income investors, but these buyers are notoriously price sensitive and will not push the price up the way growth investors do.  There is room to swing-trade this name, but the days of easy buy-and-hold gains are behind us.

GLD is stuck in the lower $130s as the supply of dip-buyers is drying up and new lows seem likely.  Everyone who wants Gold already has some and it will be a challenge to attract new buyers at current levels.

TSLA  annihilated shorts yet again.  The market can stay irrational longer than we can remain solvent and that is clearly the case here.  Climax tops reverse quickly and the sideways trade over the last couple weeks showed the top was not in yet.  At this point there is no trade because the only thing crazier than buying it at these levels is shorting it.

Plan your trade; trade your plan

PM: Is this the obvious top?

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
One of the most interesting days in quite some time.  We made new highs following Bernanke’s remarks to Congress, but came crashing down following the release of the latest Fed minutes.  Volume was well above average and the highest since April’s dip to the 50dma.

MARKET SENTIMENT
Did we learn anything new today?  Bernanke and the Fed minutes confirmed easy money would continue, but not last forever.  Did this really surprise everyone enough to justify a 2% intraday reversal???  This was not the first time Fed members discussed ending monetary easing, but nervous traders were looking for an excuse to dump and short shares as modest selling swelled into a stampede.

TRADING OPPORTUNITIES
Expected Outcome:
We came a long way from April’s test of the 50dma and pullbacks are part of every advance.  Will this be a one-day dip before finding support?  Will we bounce off of 1600?  Or is this the end of good times and we are on the verge of a bear market?

Bear markets happen when reality is worse than expected, but this rally is based on reality being better than expected.  There is a fair amount of bearishness already priced in so don’t expect a major crash any time soon.  The global economy is weak, but improving and even though we’ve seen dramatic gains, we are a long way from euphoric highs.  Most of these gains are recovering from over-bearishness and returning to normal levels.

To trigger a moderate correction, we need a new and unexpected risk.  The Fed has always discussed ending monetary easing, so major selling on what is know and widely expected is unlikely.  Selling can always beget selling, but that simply presents us with another buying opportunity.  Someone else’s loss is our gain.

Alternate Outcome:
Every bear begins with one down day and this could be that day.  We will assume the rally remains intact until proven otherwise, but it is prudent to trade defensively after such a strong rally.

Trading Plan:
No matter which way this market breaks, expect a near-term bounce.  Maybe it will happen at 1650 or 1600, but this market will bounce.  The bigger question is if we rebound to new highs, or the bounce fizzles and we continue lower.  Cautious traders can sell proactively.  Optimistic traders can hold as long as their trailing stops don’t get triggered.  We have no idea how far this weakness will go, so the easy solution is to take our profits and wait for the next trade.  It is possible for a nimble day or swing-trader to snag some short profits with a stop above recent highs, but be prepared for a near-term bounce and take worthwhile profits.

Plan your trade; trade your plan

PM: Yet another new high

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
Stocks closed above 1665 for the third time in a row as buyers keep buying and holders keep holding.  Volume was slightly above average as we support record highs.

MARKET SENTIMENT
As “overvalued” and “over-bought” as this market is supposed to be, it sure isn’t acting like it.  Most people know prices rise on strong demand, but they also rise on tight supply.  Many are afraid of this market but we keep pushing to new highs because current holders don’t want to sell and that keeps supply scarce.  Under those conditions we don’t need a lot of demand to continue rallying.

Fiscal Cliff, Sequester, Cyprus, Socialists in Italy, weak hiring, and all the rest were reasons this market was going to collapse.  Everyone knew it was a dangerous and they stood on the sidelines waiting for the inevitable crash.  Yet here we are at all time highs.  What happened?  Why was everyone so wrong?  The market fully priced in these risks and when events turned out less bad than feared, the market rallied strongly in relief.  One of the most difficult things to do is ignore what everyone else is concerned about, but clearly that was the right trade this year.

TRADING OPPORTUNITIES
Expected Outcome:
No one knows where this is going.  I was bullish since the November lows, but this rally easily beat my wildest expectations by over 100-points.  Successful traders recognize their mistakes and adapt to the market we are given.  It is okay to be wrong, it is fatal to stay wrong.  No matter what we think, the trend remains higher and is the only trade to make here.

Alternate Outcome:
I have no idea how long this rally will last.  It’s been a painfully easy rally to ride, but at some point the music will stop and we don’t want to be left holding the bag when that happens.  Given the speed of recent gains and breaking above the upper trend-line, we need to be increasingly alert for a pullback.  There is a difference between a modest pause that refreshes and one that starts a major correction.  We have key support levels to watch and trade, but until we violate them, assume every dip is buyable.

Trading Plan:
Holding 1665 through Wednesday shows buyers believe in this market and new-high profit-taking is winding down.  Medium demand and tight supply equal higher prices.  Baring a stumble on Wednesday, that is where we are headed.  There is no reason we need to be in this market and locking in gains is a prudent move given the strength of recent gains, but shorting remains a fool’s game as this market shows no signs of letting up or breaking down.  Key support is way back at 1600, but the defensive optimist will move his stop up to 1650.

AAPL daily at end of day

INDIVIDUAL STOCKS
AAPL closed modestly in the red following Cook’s grilling on Capitol Hill.  No fundamental news was revealed during the hearings and this was just an excuse for the cautious and bearish to sell stock.  Completely unrelated to this appearance, all the calls for Cook’s head are ridiculous.  Cook is running a great company with strong revenues and historic earnings.  What more can we ask of a CEO?  He has zero control over the popularity contest also known as the stock market.  Steve Jobs was a great visionary, but most people unrealistically view him as a superhero.  They think AAPL would be $1000 if Jobs were still a the helm and inventing the next must have device, but what most forget is innovation was already drying up under Jobs tenure.

The brilliant and groundbreaking decision was a building the iPod.  From there everything has been evolutionary.  The iPod’s dominance was threatened by phones with built-in MP3 players, so in reality the iPhone was a defensive product.  The genius came from ditching a keyboard and buttons to maximize screen space for web surfing.  The next great idea was the App Store, but that was driven by hackers who were jail-breaking early iPhones.  Jobs fought stubbornly to lock down the iPhone for as long as he could, but his eventually giving into the hackers is one of the best things that happened to the iPhone because it made it a truly useful and must have device.  That was in 2008 and since then everything out of Apple has been incremental and easily predictable.  The iPad is just a large iPhone, without the phone, and the iPad Mini is just a smaller iPad.  iTV and iWatch will never be more than niche products because they lack the innovative and utility break thoughts that made the iPod and iPhone sensational and fabulously successful products.    Even though the stock prices climbed through 2012, the innovation at Apple peaked under Steve Jobs back in 2008.

Cook is a great CEO and he is not responsible for the stock’s price decline.  Even Jobs would have been helpless to prevent the euphoric run-up and subsequent selloff.  That’s the way crowds work and is not a reason to remove a perfectly competent CEO.

Plan your trade; trade your plan

PM: One point selloff

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
Stocks failed to hold early gains and slipped a single point.  Volume was lower than recent days and this looks more like rest after a strong run than anything we should be concerned about.  We cannot go up every day and given the hot streak,  a one-point giveback is not a big deal.

MARKET SENTIMENT
The bounce that should have died in January continues setting all kinds of records.  It is hard to avoid commentary on how rare this rally’s performance is in historical context.  But that shows people are still looking for excuses to distrust this rally.  As long as suspicion remains high, look for the rally to continue.

The “sell in May” folks are running out of time and are 70-points in the hole.  Without a doubt we could give all that back in the next 10-days, but so far 2013’s “buy in May” is one for the record books.  But there is always next month.  Maybe it will be “Sell in June and go to the Moon”.  That sounds catchy.  Of course I better not joke about it lest people start repeating and believing in it.  Never forget we trade people, not calendars, rhymes, or Wall Street folklore.

TRADING OPPORTUNITIES
Expected Outcome:
Stay on the winning side of this market, but transition from offense to defense.  We are in this to make money and that is best done by locking in profits when everyone else is dreaming of bigger gains.  Either sell proactively or tighten up our trailing-stop to ensure we protect our hard-earned profits.  Too often I hear traders talk about profits like they are less valuable than initial investment.  The only reason we put ourselves through this brain damage is to capture profits, don’t let them slip away.

Alternate Outcome:
Every correction begins with one down-day.  While this might not be that day, we need to keep a lookout because that day is coming.  The eventual top will likely sneak up on us when everyone writes it off as another normal rest day following a hot streak.

Trading Plan:
Look for opportunities to lock-in profits, either by selling proactively, or using a trailing-stop.  We have major support back at 1600, but waiting that long would give back a big chunk of our profits.  Instead defend minor support under 1650.  We stand a greater chance at getting shaken out in a routine pullback by using a closer stop, but our main focus is shifting to defense after such a strong move.  We will shift back to profits when this move ends and we come across the next attractive setup.

TSLA daily at end of day

INDIVIDUAL STOCKS
AAPL had a good day and recovered the 50dma.  Holding this level shows big money is potentially supporting this stock after many months of selling it as fast as they could.  But if we fail to hold the 50dma, it indicates this rebound is built on nothing more than the hope and prayers of stubborn bulls.  These diehards have not been able to defend the stock over the last $300 and will continue losing this battle if they don’t get help from deeper pocketed investors.

GLD had a huge rebound as this boring, safe, commodity is keeping conservative investors up at night.  The obvious short ended in a massive short-squeeze today.  The time to short was earlier in the move and the retest of $130 was the time to take profits.  Look for volatility to continue and the best trade remains buying weakness and selling strength.  For the time being the down-trend remains intact and look for dip-buyers to sell in droves when the stock breaks $130.

TSLA is hanging in there after the secondary offering.  Climax tops often end in a spike higher.  Holding these levels for a few days means the top might not be in and this is remains a dangerous, even suicidal short.  This thing will breakdown at some point, but as long a buyers keep buying the $80s, stay away.

Plan your trade; trade your plan

PM: Don’t look down

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
Stocks broke through the 1630 ceiling and finished at 1650.  Volume was only average, but quicker than recent days.

MARKET SENTIMENT
There are two kinds of traders in this market, those afraid of heights and those that don’t look down.  It is easy to claim this won’t end well, but people have been saying that for months, yet we keep going higher.  This has been the most trustworthy market that no one trusts.  Only after everyone believes in this thing will we finally exhaust the supply of buyers.

TRADING OPPORTUNITIES
Expected Outcome:
We are about to find out how far we can come in a month’s time.  So far we are 114- points above April’s low set less than a month ago.  A dip to 1600 is in order, but that doesn’t mean it will happen.  I am reluctant to buy here and it seems like a decent time to lock-in profits.

Alternate Outcome:
This rally will end at some point and the strong gains bring us closer to that day.  A five or ten percent pullback is normal, healthy, and expected, but if this market continues higher without pausing, the resulting correction gets bigger.  Strength into the fall means the next correction could lead to a bear market.  The higher they go, the harder they fall.

Trading Plan:
Locking in profits here is not a bad idea.  We are in this to make money and can only do that by selling our winners, often when we least want to.  The most confident can move their stops up to 1620 and see what happens next.  The most meaningful level of support is 1600; until we violate that, assume any weakness will bounce.   A day-trader should look for a possible pullback and take a quick ride lower, but this is only for the most nimble and experienced

TSLA at end of day

INDIVIDUAL STOCKS
Horrible day for AAPL.  I find the midday plunge under $450 concerning.  This was obviously stop-losses getting triggered, but more significant than the few dollar loss is it shows many longs are not committed and simply trading the rebound.  This stock will only recover if it finds institutional sponsorship that doesn’t waver in the face of day-to-day volatility.  If it firms up and regains the $450 level, this was a false alarm, but if selling continues, it shows this bounce will end like all the others.

LNKD recovered the 50dma on huge volume.  As long as the broad market holds up, the stock is buyable.  NFLX ripped to the upside and continues proving bears wrong.  Same goes for AMZN as it recovered the 50dma after a brief flirtation with the 200dma.  Hopefully shorts got out when it failed to breakdown.  It is okay to be wrong, but fatal to stay wrong.  What can we say about TSLA, except wow.  If this isn’t a climax top, I don’t know what one is.

Plan your trade; trade your plan

PM: Nice recovery

By Jani Ziedins | End of Day Analysis

PM Update

MARKET BEHAVIOR
Stocks recovered much of yesterday’s selloff thanks to a surge into the close.  Volume was light, but most of this rally has been ‘suspiciously’ light and so far it worked out, so we shouldn’t read too much into it.

MARKET SENTIMENT
Buyers won’t allow much weakness to develop before they swoop in and buy a dip.  Anymore ten-points is a buyable as anxious, big-money feels the heat from missing this rally.  Here is an interesting article from Yahoo Finance discussing how upset the hedge fund community is with Bernanke and his easy money policy.  You’d think a rising market would  have these guys gushing with praise, but “smart” money missed this rally and their pessimism is making them look downright foolish. They blame Bernanke for their struggles because obviously the guy in the mirror had nothing to do with it.

Everyone insists this market is overly-bullish, yet there is little data backing this up.  There are the grossly bearish surveys I shared earlier in the week, and now we have these grumpy hedge fund managers who are humiliated by their underperformance.  Everyone assumes this market is rising because it is so bullish, but they have it completely backwards   This market is rallying because everyone is bearish!  We need new buyers to push prices higher and there is no disputing this market keeps going higher.  No matter what anyone says this market found an endless supply of new money and we are anything but overly-bullish.

The easy answer people throw out is Ben is inflating stocks, but I bet most of these accusers cannot explain how he is doing it.  They simply repeat what

S&P500 daily at end of day

the talking heads say on TV say or the guy in their coffee club told them.  Ben is buying bonds and bonds have never been higher.  People don’t sell things that keep going up and any outflows from bonds have been relatively modest.  Falling prices will drive bond holders to stocks but so far bonds have done nothing but go up.  There is some chase for yield, but that is a fairly modest phenomenon.  The simple truth is stocks continue rising because all the pessimistic bears have been dead wrong on all accounts and they continue being wrong.  Double dip, Euro Contagion,  Debt Ceiling, Sequester, you name it, the bears got every single thing wrong and the market continues higher because the real world is far better than people make it out to be.

TRADING OPPORTUNITIES
Expected Outcome:
Keep doing what is working.  We could see a near term dip to 1600, but buyers’ ferocious appetite for dips might prevent us from retesting this level.  As long as we hold 1600, the rally is alive and kicking.

Alternate Outcome:
At some point he cynics will be right and we all know this market cannot go up forever.  Look for a series of lower-highs and lower-lows to signal demand is drying up.

Trading Plan:
We can hold this market as long as it remains above 1600.  A dip under this level makes us more cautious and we should raise cash, but any bounce should be bought.  So far this market is only getting stronger in May and this could be the start of the first robust summer in over five years.  Failing to hold the 50dma is when we start getting nervous.

INDIVIDUAL STOCKS
AAPL didn’t see the same late day rebound as the rest of the market and finished near the day’s lows.  There are few traders more arrogant than AAPL bulls and is why I still think we have not seen the final purge in this stock.  We are remain above the 50dma and it is holdable here, but everyone should keep this on a tight leash because breaking the 50dma will likely set off a wave of stop-loss selling and shorting, pushing it to new lows.  Of course finding support from big money at the 50dma means we have a near-term bottom and it is setting up for a nice swing-trade.  The next negative catalyst is the release of a warmed over iPhone5s.  If this phone fails to impress, look for sellers to punish the lack of innovation.

GLD reclaimed most of the gap lower, but watch for support at $140 to turn into resistance.  If Gold cannot reclaim this level, look for lower prices in the near future.

Plan your trade; trade your plan

PM: Taking a break

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
Stocks gave up a little ground, but are still above Tuesday’s close.  We cannot go up every day and after covering 100-points in three weeks, the market is entitled to some well-earned rest.  Volume was average, but less than yesterday, showing the selling was rational and orderly.

MARKET SENTIMENT
Nothing like a few point selloff to get bears excited again.  Just like a broken clock, they will be right at some point.  As nimble traders we have to decide if this is finally their moment.  Predictions of this market’s demise are clearly premature since we are only half a percent from all-time highs.

TRADING OPPORTUNITIES
Expected Outcome:
While this might not be the top, we could see a modest dip after the impressive streak of up days.  The new level of support is 1600 and any bounce off this level is buyable, although eager buyers might not allow the market to fall to 1600 before stepping in.

Alternate Outcome:
At some point bears will be right and we get closer with each passing day.  We are just shy of all-time highs and it is clearly premature to call for a top, but we must stay vigilant and stick to our profit targets, trailing-stops, and stop-losses.   This market will top when everyone expects it to continue higher and our rules will prevent us from being seduced into giving back all of our hard-earned profits.

Trading Plan:
1600 is the level to watch.  As long as we remain above that, the rally is alive and kicking.  A dip to 1600 that finds support is buyable.  Breaking 1600 means we need to be more cautious and locking in gains is good defense.  The 50dma is racing higher with each passing day and it will reach at least 1580 by the time the market dips to it.  Failing to hold the 50dma is another concern and expect stop-loss selling and shorting to pressure the market back down to 1540.  At that point the viability of the rally is finally in jeopardy.  Until then the wind is at our back and stick with the rally.

LNKD daily at end of day

INDIVIDUAL STOCKS
AAPL finished at the lows of the day, but held $450.  Much like the broad market, AAPL earned a break and today’s selling was on light volume.  The stock is acting well and this is the longest streak above the 50dma in well over half a year.  But don’t lose sight of the fact this stock is in the middle of a brutal correction and half a dozen similar bounces fizzle and collapsed lower.  The question any bull needs to answer is who will buy this stock here?  This was the most widely held stock and many were overweight AAPL near the highs.  The selloff humiliated and humbled many investors and they are far less likely to embrace it with such reckless abandon any time soon.  The dividend boost and share buyback make it attractive to income investors, but these are highly price sensitive investors and will not bid the stock back up to old highs.

NFLX bounced near the $200 level on strong volume.  There are no signs this stock is ready to breakdown and bears are in store for another round of humiliation.

LNKD slipped under a rapidly rising 50dma.  While it would be nice to see the stock bounce off this moving average, holding up here is not bad.  Selling has been contained and buyers are willing to step in at these levels.  If the stock breaks above the 50dma on volume, it is buyable, but expect a wild ride and take profits when it feel like the stock is invincible.

Plan your trade; trade your plan

PM: Who believes in this rally?

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
Stocks set another all-time closing high on slightly elevated volume.  This was the fourth consecutive record closing high as the good times keep rolling.   At 1632 the market is getting a tad extended from recent resistance, now support at 1600, and the 50dma back near 1560.

MARKET SENTIMENT
So far its been a “Buy in May” kind of month as we set record high after record high.  There is plenty of time for holders to lock-in recent gains and “go away”, but for the time being the market is chasing this breakout.

It is easy to come up with reasons this market should go down and hard to justify a 100-point rebound off of the 50dma.  But that is what makes this move work.  When everyone expects one thing, it is already priced in and the only thing left is doing the opposite.  Bears will debate how overly bullish we are at these levels, but the price action clearly demonstrates how overly bearish the market really is.  I often hear bears talk about widespread bullishness, but I rarely hear from these bulls firsthand.

TRADING OPPORTUNITIES
Expected Outcome:
Keep doing what is working.  If someone is out of the market, it is a little late to chase the breakout and wait for the inevitable step-back.   Even if we head higher over the next couple days, it is highly unlikely this is the last time we will see 1630 in coming weeks.

Alternate Outcome:
The market rose nearly 300-points six months and it’s been a phenomenal ride for anyone willing buy the post-election pessimism and Fiscal Cliff hype.  But all good things must come to an end and so will this rally.  I don’t know if it will be this week, this month, or this quarter, but at some point we will finally get the correction everyone is calling for.  The longer we put it off, the uglier it will be.  Stick with the rally, but keep a lookout for waning demand, leading to lower-highs and lower-lows.

Trading Plan:
Stick with this rally, but look for opportunities to lock in profits.  Either sell proactively on the way up, or follow the market with a trailing-stop.  We’re in this to make money and the only way to do that is selling winners.  It is premature to short this market for anything other than a quick day or swing trade and for the time being, every dip remains buyable.

Plan your trade; trade your plan

PM: Quiet support

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
A quiet day for stocks as they closed modestly higher on light volume.

MARKET SENTIMENT
Neither buyers nor sellers showed up in force following Friday’s breakout.  A large part of this market’s strength derives from a core group of confident holders who hold through thick and thin.  They were not spooked by recent volatility and are uninterested taking profits after Friday’s record close.  As long as these holders continue holding, it keeps supply off the market and makes it far easier for the rally.

TRADING OPPORTUNITIES
Expected Outcome:
How much longer this can continue is anyone’s guess, but there are no signs the market is weakening or running out of buyers.  Stick with what is working and as long as we continue making higher-highs and higher-lows, we have the green light to own stocks.

This market often takes a step back after making new highs, so don’t let that catch you off guard and certainly don’t short it for anything longer than a day or two swing trade.  Work under the assumption every dip will bounce until it doesn’t.

Alternate Outcome:
Sell in May has been a thing for the last three-years and there is nothing to say we cannot make it four in a row.  Stay vigilant and watch for lower-highs, lower-lows, and breaking support.

Trading Plan:
Expect near-term weakness, but the best trade is owning this market as long as we hold 1590.  Buy the rebound above 1590 and use 1590 as a trailing stop-loss.  The next support level is the 50dma, break that and 1540, and there is a lot of clear air down to the 200dma.

AAPL daily at end of day

INDIVIDUAL STOCKS
AAPL had another good day and is up nine of the last eleven trading days.  $75 in two-weeks is an impressive stretch.  At this rate it will be back to $700 by late June.  Sounds plausible doesn’t it?  Of course not.  Not even the most rabid bull would believe something like this.  If we all agree the rate of gains cannot continue, then we must decide where and when we will slow down and even pullback.  $470 is a major peak and a significant challenge for the stock.  This is the stock’s first chance at setting a higher-high in over half a year, but the rebound might run out of gas just as we get there.

Unless someone believes in the $700 by July trade, now is a decent time to consider locking in gains and is a poor place to buy more stock.  Wait for support at the 50dma to add to your position.  Failing to hold the 50dma shows big money is not supporting this stock and it will likely make new lows before this is all done.

AMZN slipped back to the 50dma.  A bear needs to be patient and persistent.  Take small losses and eventually you will hit the home run.

LNKD is finding support at the 50dma.  We are still waiting for the high volume bounce to show buyers continue supporting this stock.  There is more upside left, the only question is if the near-term selling is done.  Wait for the stock to tell us.  We will miss some profits, but it dramatically reduces our risk by waiting for the confirmation.

Plan your trade; trade your plan

PM: Bad is good

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
Stocks reclaimed all of yesterday’s selloff and are just shy of 1600 for the third time.  The market established a mini-trading range between 1580 and 1600 over the last week and a half.  Yesterday it felt like we wanted to breakdown, today everyone is looking up.  It is hard to predict the intra-day moves, but the trend remains higher and is the better trade.

MARKET SENTIMENT
Friday’s headline event is the monthly employment report.  February’s numbers were shockingly bad and dramatically lowered expectations for April’s.  But as disappointing as February’s were, you wouldn’t know it from looking at the stock market.  Last month’s employment report preceded a 50-points surge that smashed all-time highs.

This market shrugs off bad news like no other and we certainly shouldn’t fear a bad employment report tomorrow.  A big reason is traders are buying because of monetary easing.  The logic goes, the worse the economy, the more money the Fed pumps into the system.  In this perverse, bizarro world, bad is actually good.  Does this mean good is bad?  Hard to test this theory since we haven’t seen good news in a long time.  But if this market became addicted to easy money, a strengthening economy threatens that and good could be bad.    Between February’s unexpectedly bad showing and Sequester layoffs finally kicking in, it is hard to imagine a legitimately good employment report Friday.  We could easily beat the pathetically low expectations, but that is simply less bad.  We are still a long way from posting healthy employment numbers that signal a strong and vibrant recovery.

TRADING OPPORTUNITIES
Expected Outcome:
As we know, this market does not respond to fundamentals, so we are wasting our breath spending more time on them.  Buyers keep buying every dip and today’s rebound shows they still have sufficient numbers to support this market.   Expect the zigzag higher to continue as big money buys every dip, but dials back purchases near new highs.

Alternate Outcome:
Every day brings us closer to the dip that doesn’t bounce.  I don’t know if it is next week, next month, or next year, but I do know it is coming.  We need to keep a lookout for the end of this rally because it will happen when most people least expect.  This rally leg lasted longer than others because it is immune to negative headlines.  While that often takes down other markets, this one needs to run out of buyers while everyone is still expecting higher prices.  No matter how bullish people are, once we run out of buyers there is nowhere to go but lower.

Trading Plan:
The rally remains on firm footing unless we dip under 1570.  From there we likely bounce off the 50dma and the bull is not in serious jeopardy until we slip under 1540.  Stick with what is working and expect the grind higher to continue in spite of, actually because of, all the calls for a top and selloff in May.  Use a trailing stop to protect gains and don’t try shorting this market until we see buying stall as seen by lower-highs and lower-lows.

INDIVIDUAL STOCKS
AAPL holds the 50dma for a third day.  Maintaining these levels into next week demonstrates real support for the stock.  As long as we stay above the 50dma the stock is holdable, but keep it on a tight leash and take profits early and often because it will be a choppy assent due to all the overhead resistance weighing on the stock.

LNKD daily at end of day

LNKD dropped sharply in after hours trade on a disappointing outlook.  Even with a $20 selloff, the stock is only back to levels from a couple of weeks ago.  It is tempting to hold a stock that we think is the next 10x winner, but more often than not we are better off taking profits after such a strong run.  The stock probably has more upside, but it cannot keep up its current rate of gains.  Lock in profits and look to reenter at a better price.  We’re in this to make money and we can only do that by selling our winners.

Plan your trade; trade your plan

PM: Is the rally dead?

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
Stocks dipped nearly one percent on average volume.  Since early March the market has been range bound with each breakout and selloff stalling near the highs and lows.  Today’s selloff short of 1600 continues that pattern.

MARKET SENTIMENT
While today’s move lower spooked many traders, we are still within one percent of all-time highs and it is premature to write this rally’s obituary.  Over the last eight-weeks the market always struggled near highs, but no matter how many people piled on the short bandwagon, buyers always stepped in to support it after a modest selloff.  Is there a legitimate reason this weakness will end differently?

People blame today’s weakness on economic data, comments from the Fed, or something else, but the truth is big money doesn’t like buying new highs.  We’ve seen this play out time and time again over the last couple months as buying stalls near the highs, but these same traders gladly rush in and support the market a few points lower.  This cycle of buying dips and shunning highs is what keeps us rangebound.

Many bears are excited this is finally the selloff they’ve been waiting for, and they could be right, but is there new evidence this dip will end any differently than all the other failed selloffs since last November?  Cynics point to weak economic data, but this market rebounded from negative GDP headlines, hiring numbers that missed by six-figures, and all the noise out of Europe.  If the market ignored all of that, why is it suddenly worried about today’s headlines?

Markets move exclusively on supply and demand.  Institutional buying dries up near the highs and picks up near the lows.  Until we see a material violation of this pattern, stick with it.  This market will eventually top on lack of demand, but support over the last four months shows there is still an ample demand ta these levels.   The current crop of recent sellers will power the next move higher when they buy back in.

TRADING OPPORTUNITIES
Expected Outcome:
Today’s dip doesn’t change anything and was largely expected by anyone who’s paying attention.  We didn’t know today specifically would be the day, but we new it was coming and now that it’s here we shouldn’t be scared of it.  Look for support near 1570 and the rally is not in serious trouble until we break through 1540.

Alternate Outcome:
Every change in direction starts with one day.  Is today that day?  Probably not, but we need to watch closely just in case.  It is safest to assume this is just another swing within the trading range because trends are more likely to continue than reverse.  I will only become concerned if we close under 1570 and bearish if we break the 50dma.  Anything else is a buying opportunity.

Trading Plan:
Stick with what is working.  While scary, today’s dip is nothing new.  Watch for buyers to support this market above 1570.  Anyone looking to get in the market can use this weakness as a buying opportunity with a stop under 1570.  If we cannot hold 1570, the next level we will test is the 50dma.  Failing that means the widely expected selloff is finally here.

AMZN daily at end of day

INDIVIDUAL STOCKS
AAPL took a breather with the rest of the market.  We are still above the 50dma and a bull can continue holding, but keep the stock on a tight leash and sell if we break the 50dma.  Look for overhead resistance near $470 and take profits before then.  There are a lot of unhappy AAPL shareholders looking to get out at break-even  so expect substantial selling pressure as the stock moves higher.  I remain wary of this rebound and think the stock needs one last flush lower to chase off the last of the hopeful, but that is just my opinion and as long as we hold the 50dma, bulls can continue ignoring me.

AMZN had a rough day and failed to hold the 200dma for the first time in over a year.  This is a big change in personality and signals a lack of support from bulls.  This is a decent short entry with a stop above the 200dma.  Expect volatility in a move lower and take profits after strong moves and reshort the inevitable bounce.

I’ll write about UA tomorrow.  Leave comments with other stocks you want me to look at.

Plan your trade; trade your plan

PM: How high is too high

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
New all-time highs as the market rebounded from an early selloff.  Buyers keep buying this market and there is clearly no problem with demand.  Today’s record was set on elevated volume, showing plenty of strength left in this bull.

MARKET SENTIMENT
The cynics were dealt another defeat.  They will be right at some point, but timing is everything and they remain on the wrong side of the trade.

Tomorrow is the first day of May and we get to hear everyone promote “Sell in May….”.  There are two views on this, those that fear summer weakness and already sold, and those that don’t care and are still holding.  At this point Sell in May has already been factored into the market is a non-issue.  We could selloff for any number of reasons, but Sell in May is not one of them.  If anything this is slightly bullish because recent sellers become potential buyers as the rally continues.

Traders remain wary of this market and with plenty of good reasons, but the market is not listening.  Since we make and lose money by the market’s moves, that is what we need to give the greatest weight to.  At the same time we cannot lose sight of what others are saying because they could eventually be right.  We are four-years into this bull market and it is fairly old for a bull.  Currently we are living on easy money complacency.  The real shock will come on the first hints of withdrawing monetary stimulus.  We are still a ways from the Fed increasing interest rates, but the a whiff of winding down bond buying will send people running for cover.  If the economy continues making progress, we could reach levels where the Fed feels comfortable pulling back, but like any junky, the market is going to suffer from painful withdrawals.  While the economy might be stable, we could fall into bear market.

TRADING OPPORTUNITIES
Expected Outcome:
Keep doing what is working.  The market is on the verge of hitting 1600 for the first time in history and buyers continue showing up in sufficient numbers to hold us at these levels.  The more people fear this market, the more comfortable I am.  We need to take this day-by-day, but the likely outcome is a strong summer with weakness getting pushed back to the fall.  We could see a 3-5% pullback at any point, but the larger correction is still months away.

Alternate Outcome:
There is a lot of air under the market and anything could trigger a stampede selloff.  Price action remains bullish, but we need to watch for cracks in the foundation.  As small traders we have the advantage of speed.  Use trailing stops to ride the market higher while guarding against the eventual breakdown.

Trading Plan:
The market likes round numbers and 1600 is just a couple of points away.  We might see a little selling after brokers pass out the 1600 hats, but as long as we hold 1570 everything is fine.  Investors looking to get in this market don’t let much weakness develop before jumping on discounted shares.  Slipping under 1570 means buyers are no longer enthusiastic and more cautious, likely leading to a test of the 50dma.  Failing to hold 1540 means we ran out of buyers willing to buy these levels and we need to fall further before value investors will step in.

INDIVIDUAL STOCKS
AAPL had a strong debt offering as part of its plan to return cash to shareholders.  It is nice to see the company sharing the wealth with shareholders, but it is too bad it cannot find something more innovative and exciting to do with its profits.  We can continue higher on a relief rally, but it is hard to get excited about an iPhone5s and we should expect AAPL to fall further behind Samsung this year.  It is also likely the Galaxy S4 will outsell the iPhone5s as few iPhone4s users feel compelled to spend the money upgrading.  PCs have a 4-year refresh cycle and as smart phone capabilities plateau, expect a similar shift to less frequent upgrades.  But what is bad for AAPL is good for ATT and VZ.

AMZN recovered the 200dma as dip buyers rescued the stock.  Was the selling overdone or just getting started? The rebound can continue for a couple more days, but another test and violation of the 200dma shows a lack of conviction from buyers and more selling is likely.  But a note for shorts, this is a trading stock and AMZN is not going out of business anytime soon.  Don’t get greedy and take profits near $220.  For longs, it is hard to get excited about this bounce until it reclaims the 50dma.

TSLA daily at end of day

I had a reader request to look at TSLA.  I hadn’t pulled up the chart in a while and boy did I miss an impressive move.  It is hard to be anything but cautious after such a strong run.  Today’s huge volume reversal is also an obvious concern.  Anyone lucky enough to ride this higher should consider locking in some, if not all of their profits.  There could be more to this move, but obviously the rate of gains cannot continue at this pace.  A bull could buy back in after finding support at $45.  As for shorting this stock, it is tough to get in front of such a strong move, but if someone is feeling lucky, short with a stop at $55 or $58 and take profits at $45.  Since this is such a volatile stock, manage risk by trading a smaller than normal position.

While I cannot review all the stocks people request, I’ll try to incorporate reader request in future posts, so keep leaving suggestions in the comments.

Plan your trade; trade your plan

PM: New closing highs

By Jani Ziedins | End of Day Analysis

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
We set a new closing high on light volume.  Some people worry about the sustainability of light volume, but this market sure doesn’t.  We are a hair under 1600 and well past the point of a head-and-shoulders top.

MARKET SENTIMENT
The next potential bearish pattern is breaking through 1600 and forming a double-top, but at this point these predictions are mostly wishful thinking from cynics who missed the rally.  This market cannot go up forever, but as long as it keeps going up we should ride it, not fight it.  The rally remains in effect until we start making lower-highs and lower-lows.

I was bearish until April 19th’s bounce off the 50dma.  The market had the perfect setup to selloff, yet it bounced instead.  When the market doesn’t act as expected, it is right and we are wrong.  No ifs, ands, or buts.  We made a mistake in our analysis and need to change our outlook.  We might eventually be proven right, but never forget, in the market early is the same thing as wrong.

The market continues rallying because cynicism is the rule, not the exception.  Even bulls are waiting to buy the pullback.  When everyone expects near-term weakness, they sell ahead of it and wait to buy it, but this behavior prices in the pullback and it doesn’t happen.  In fact the opposite is more likely because recent sellers become the next crop of buyers.  That is why this market continues defying gravity.

TRADING OPPORTUNITIES
Expected Outcome:
It will be interesting to see where the market goes from here.  Willy buying dry up near recent highs and we stay within the trading range, or will we breakout and defy the doubters by marching to new highs?  Chances are it will do a bit of both.  Look for a new breakout and then a consolidation of those gains.  Holding above 1570 shows buyers are still supporting this market.

Alternate Outcome:
The market has a nasty habit of convincing us we are wrong before proving us right.  Many bears are giving up and going long this market.  That buying is the fuel pushing us higher, but these are often the last buyers.  The market is far more patient than most traders and only after people give up waiting for the pullback will it finally happen.

Trading Plan:
Look for new highs in coming days, and use this opportunity to move a trailing stop up to 1570.  If we break this support level we will dip to the 50dma and possibly challenge 1540.  Failing to hold 1540 means the long predicted selloff is finally taking hold.

INDIVIDUAL STOCKS
AAPL finished just shy of the 50dma and is up 10% over the last couple weeks.  Is this finally the bottom all the bulls have waited for?  Could be, but it sure doesn’t feel like the move down to $385 was true capitulation that dramatically altered sentiment and ownership in the stock.  We could rally for a few more days, but AAPL is a trading stock, not an investing one and the best money is made buying dips and selling rallies.  We probably have one more whoosh lower before finally demoralizing and chasing off the last of the hopeful, especially now the last bullish catalysts have come and gone.

GLD daily at end of day

AMZN broke the 200dma and presents an interesting shorting opportunity with the 200dma as a stop-loss to buy the stock back.  We easily could see a bounce back above the 200dma before a larger selloff begins, but with a tight stop, the risk is limited and the potential gains are large.  A bear needs to be patient and it might take a couple tries before he finally hits on the mother load.  A rebound above the 50dma means the expected breakdown is not happening and a bear needs to wait for another opportunity.

GLD mostly closed the gap from $143.  Does this mean the selloff is done, or just a dead cat bounce on the way lower?  This easily could be the V-bottom that ends the slide starting back in September, but this is an insane amount of volatility for a “safe” commodity.    I’m not in gold and have no interest, but if I were, I’d be looking to sell this bounce, not buy it.

If you want me to write about a stock, post it in the comments and I’ll pick a few when I see something interesting.  Obviously I cannot provide insight into every stock out there, but I’ll try to include a couple new stocks here and there.

Plan your trade; trade your plan