End of Day Analysis Archives - Page 6 of 56

Jun 02

What smart money is doing at these multi-month highs

Free After-Hours Analysis:

The S&P 500 added 1.5% Friday as it powered to ten-month highs.

May’s employment report showed the most robust hiring in four months as employers continue shrugging off persistent inflation and high interest rates.

This was one of those half-full/half-empty moments for the stock market and it was all half-full on Friday as investors embraced the economic resilience and shrugged off the prospect of future rate hikes.

Will the stock market’s indifference to inflation and interest rates last? Probably not. That’s why smart money is already locking in some profits at these multi-month highs.

As I wrote Wednesday:

Ignore both the bulls and bears. Anyone positioning for a big directional move in either direction is simply not paying attention. This is a choppy, sideways market with a slight upward bias. Money is made trading against these swings, not betting on their contuation. Until further notice, dips are buyable and rips are sellable. And just as important, take profits early and often because anyone holding a few days too long will watch their winners turn into losers.

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Bears were right for a few hours this week during our brief “sell the news” moment, but anyone that didn’t collect those profits were left holding a pile of losses a day later.

And the same will apply to bulls pressing their bets at multi-month highs. We take profits when we have them because if we don’t, the market will steal them back a day or two later.

I still like this market and the slow grind higher will continue, but anyone pressing their luck near 4,300 hasn’t been paying attention. Lock in some very worthwhile profits (7.5% in a 3x ETF over the last two sessions) and then get ready for the next trade.

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May 31

The easy trade bulls AND bears keep screwing up

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 slipped 0.6% as Congress moves toward resolving the debt ceiling crisis.

This negotiated compromise finally lifts the clouds that have been hanging over stocks for weeks. But as I wrote last week, anyone waiting to buy stocks after a debt deal was reached would find themselves a day late and a dollar short. And I further warned readers on Monday:

Of course, now that we are 100 points higher, the risk/reward flipped against us. The easy profits are behind us and we are more vulnerable at the upper end of the recent range. This is the time to be taking profits, not chasing an imaginary breakout.

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Successful traders make money buying risk and selling safety. Last week was the time to buy the debt ceiling worry, and this week was the time to sell the debt ceiling relief. “Buy the rumor, sell the news” is as old as the stock market itself.

As for what comes next, ignore both the bulls and bears. We are not powering higher in a massive short squeeze the same way we are not tumbling back to the 2022 lows on a crumbling economy.

Anyone positioning for a big directional move in either direction is simply not paying attention. This is a choppy, sideways market with a slight upward bias. And now that we are falling into the slower summer months, this will only reinforce the market’s listlessness.

If every dip is going to bounce and every bounce is going to dip, money is made trading against these swings, not betting on their contuation. Until further notice, dips are buyable and rips are sellable.

And just as important, take profits early and often because anyone holding a few days too long will watch their winners turn into losers.

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May 30

Why smart money was buying the debt-ceiling uncertainty last week

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Our politicians finally did their jobs and reached an agreement to lift the debt ceiling. No one is happy about the proposed deal, but that’s why it’s called compromise.

And since the looming debt ceiling was the biggest worry hanging over the market, stocks finished Tuesday’s session…flat. Funny how that works.

But that doesn’t surprise readers of this blog. This lethargic reaction to good news happens so often it has become a market cliche: ” Buy the rumor, sell the news.”

Anyone waiting to buy the news of a debt deal is waaaay late to the party because all of the profits were collected last week when the outcome was far from certain. This is why I was telling readers to buy last week’s dip on Wednesday:

As for what comes next, expect the choppy, sideways trade to continue. We’re not going anywhere, but that won’t stop impulsive traders from jumping from one side of the boat to the other.

Until further notice, we keep trading against these swings. That means this week’s swoon is a buying opportunity.

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Of course, now that we are 100 points higher, the risk/reward flipped against us. The easy profits are behind us and we are more vulnerable at the upper end of the recent range.

This is the time to be taking profits, not chasing an imaginary breakout. Feel free to leave some money in the market, but make sure we lift our trailing stops to protect last week’s profits. And as always, taking some worthwhile profits proactively is never a mistake. Remember, we only make money when we sell our winners.

As for what comes next, this week’s break above 4,200 could trigger a short squeeze up to 4,300. That’s not the most likely outcome, but it is certainly a possibility. If prices rally on Wednesday, buy back what we sold on Tuesday and ride that wave higher. But most likely, not much will happen, and that means we waiting to buy the next dip under 4,200.

It makes no difference to me what happens next, only that my trading plan will be ready when the next profit opportunity comes along.

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May 26

This market is NOT fixed and bears have no one to blame but themselves

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 popped 1.3% Friday, extending Thursday’s gains and the index closed at the highest levels in nine months. Not bad for a market that was in freefall three days ago.

This late-week rebound shouldn’t surprise readers of this blog. I warned bears on Wednesday to protect those mid-week profits:

Until further notice, we keep trading against these swings. That means this week’s swoon is a buying opportunity…[J]ust like how bulls got stung this week, bears pressing their shorts are making the same mistake. This is the kind of market where if we’re not taking profits, we will be taking losses a few days later.

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And wouldn’t you know it, here we are two sessions later and greedy bears let those nice profits turn into painful losses.

This game isn’t hard to figure out once we recognize the patterns. This is not a directional market, it is a choppy, sideways one. Anyone betting on the breakout or breakdown is getting chewed up and spit out a few sessions later when the market reverses.

People who claim this market is fixed are just telling the rest of us they have no idea what they are doing. It is obvious this is a choppy, sideways market and it is no one’s fault but our own if we are letting a bearish or bullish bias wreck our trades.

That said, there is an upward drift to this sideways, choppy trade. The gains are bigger than losses and that drift will continue next week. I will still be taking profits following big moves, but I’m riding this up wave a little longer.

Buy low, sell high, and repeat as many times as the market lets us.

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May 24

Why Bears are about to make the same mistake Bulls just made

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 skidded for a second session on Wednesday, giving up -0.7% and erasing all of last week’s gains.

As I warned readers late last week, and again on Tuesday:

If you are not taking profits when you have them, you won’t have profits left to take.

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Last week’s buyers that failed to heed this warning watched all of those profits slip between their fingers. Greed doesn’t pay in this market, and it has been zinging both bulls and bears over the last several weeks and months.

The debt ceiling bickering continues, and that is enough to cool demand for stocks near 52-week highs. As I’ve written before, the debt thing will get done because the consequences of it not happening are too great. But as is usual, a deal won’t be stuck until the final hour, and we should expect the headlines to get even uglier before then.

This stubborn standoff is SOP for partisan politics. And most traders know this, that’s why stocks are not significantly lower. But at the same time, this background noise is enough to keep investors from enthusiastically pushing stocks even higher.

As for what comes next, expect the choppy, sideways trade to continue. We’re not going anywhere, but that won’t stop impulsive traders from jumping from one side of the boat to the other.

Until further notice, we keep trading against these swings. That means this week’s swoon is a buying opportunity.

Sometimes it takes a few bounce attempts before the real one comes along, but that bounce is coming. And just like how bulls got stung this week, bears pressing their shorts this week are making the same mistake.

This is the kind of market where if we’re not taking profits, we will be taking losses a few days later.

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May 23

Why Bulls AND Bears keep getting this market wrong

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 tumbled -1.1% Tuesday, giving back a significant portion of last week’s big gains.

Easy come, easy go. Luckily, this reversal doesn’t surprise readers. As I wrote in last Friday’s free post when the index was pushing to multi-month highs:

This is a choppy market and if we’re not taking profits when we have them, we will be taking losses a few days later. The market is still acting well and we don’t need to run for the hills, but it definitely makes sense to peel off some profits, putting a nice chunk of change in our pocket and lowering the risk if this selling continues next week.

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And wouldn’t you know it, here we are a few days later, and anyone still holding watched a nice pile of profits slip through their fingers.

We buy when we don’t want to buy, which is exactly what I was telling readers to do last Monday before stocks popped:

Until something changes, I’m sticking with what is working and that is waiting for the index to rally up to, and through 4,200 resistance. The market is taking its time, but as I’ve been saying for a while, something that refuses to go down will eventually go up.

And we sell when we don’t want to sell, like last Friday when stocks were challenging multi-month highs.

Trading isn’t hard when we recognize what’s coming. Last week, this was a market that refused to go down, making 4,200 the next obvious target. But once we got there, it was time to switch directions because this is a choppy, indecisive market, not a directional one.

Bears betting on a breakdown last week were just as wrong as bulls this week betting on a breakout. Buy when the crowd claims stocks are on the verge of collapse and sell when the crowd is fat, dump, and happy.

This market will make a big directional move at some point, but this is not that point. We are slipping into the slower summer months, and institutional money managers are sneaking off to their summer cottages. Until they return in September, expect this choppiness and indecisiveness to continue. That means buying the dips and selling the rips for the foreseeable future.

If you are not taking profits when you have them, you won’t have profits left to take.

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May 19

Why even bulls should be taking profits near 4,200

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 started Friday’s session with nice gains, adding to Wednesday’s and Thursday’s big rallies. Unfortunately, the buying enthusiasm peaked in those early hours and the index eventually closed in the red, down a fairly modest 0.1%.

Debt ceiling negotiations broke off without plans to resume. Debt ceiling squabbles haven’t been a problem for this market thus far, but we haven’t been this high either. Higher prices mean higher expectations, which makes it easier for hopeful investors to end up disappointed.

Lucky for readers, Friday’s cooling exactly what I described in Thursday evening’s free post:

As for what comes next, momentum is still higher, but 400 points later is the wrong time to be jumping aboard this rebound. The big and easy profits came to those of us that had the courage to buy months ago.

I can see this going a little higher, but we are falling into the slower summer season and I don’t see a lot of institutional buying happing until after summer is over. That means this is the time to be taking profits, not adding new money.

We don’t need to sell everything here, but it makes sense to lift our stops and start peeling off some partial profits. It is amazing how good it feels to put some well-deserved profits in our pockets.

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Is Friday’s selling the start of the next big pullback? No, of course not. But recent gains flip the risk-reward against us. Higher prices increase the odds of a near-term step back, and that’s exactly what we got Friday.

There is no reason to read anything more serious into Friday’s price action. As expected, we finally challenged and even broke through 4,200 resistance, but now the sideways grind resumes. Friday’s cooling price action is nothing more than that.

We buy when it is hard to buy (low), and we sell when it is hard to sell (high). Follow those simple rules and we will always outperform the average trader buying when it is easy (high) and selling when it is easy (low).

Is this the start of a bigger selloff? No, probably not. But it could be, and I’m not willing to bet this week’s pile of profits on a trade with such a poor risk/reward. (The potential profits left in this move are far smaller than the risks hanging over us.)

This is a choppy market and if we’re not taking profits when we have them, we will be taking losses a few days later. The market is still acting well and we don’t need to run for the hills, but it definitely makes sense to peel off some profits, putting a nice chunk of change in our pocket and lowering the risk if this selling continues next week.

As for Monday’s session, start buying back in if the break above 4,200 resistance turns into a powerful short-squeeze. In the other direction, if the air continues coming out of this week’s rebound, the most confident and aggressive can start shorting the cooling off.

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May 18

Why cynics got this trade so wrong and what’s coming next

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 added another 1% Thursday and hit 4,200 for the first time since last September.

While this strength caught a lot of skeptics on the wrong side of the market, I’ve been calling for 4,200 for weeks.

Here is what I wrote back in early March when the index was probing multi-month lows:

As ugly as Thursday’s session [March 9th] looked, we can’t read too much into this price action because this wave of selling was nothing more than handwringing ahead of Friday’s [Feburary] employment report.

“Sell the rumor and buy the news” happens often enough that people have given it a name. All of this week’s bloodletting actually improved the odds of a bounce on Friday. Once a nervous owner sells all of his stocks, his opinion no longer matters. So for every nervous owner that bailed out on Thursday, they lost their ability to vote on what comes next.

And more than just taking away weak owners’ votes, these worrywarts have been replaced by confident dip-buyers. If these buyers were afraid of Friday’s employment report, they wouldn’t have been jumping in Thursday afternoon. Out with the weak and in with the strong. That doesn’t sound like a bad thing to me.

Odds are good that this week’s selling priced in a lot of bad news and anything that meets expectations, or better yet, turns out less bad than feared, will lead to a nice pop.

The market bottomed two sessions later and now we are up more than 10% from those lows. Anyone that caught this fairly obvious bounce in a 3x ETF, like I do, is sitting on a really nice pile of profits.

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Now to be clear, I’m a trader and I haven’t been holding the same trade since early March, but I’ve been buying the dips and selling the bounces the entire way because I recognized this market wanted to go higher, not lower. Trading gets a lot easier and is far more profitable when we have the direction right.

As for what comes next, momentum is still higher, but 400 points later is the wrong time to be jumping aboard this rebound. The big and easy profits came to those of us that had the courage to buy months ago.

I can see this going a little higher, but we are falling into the slower summer season and I don’t see a lot of institutional buying happing until after summer is over. That means this is the time to be taking profits, not adding new money.

We don’t need to sell everything here, but it makes sense to lift our stops and start peeling off some partial profits. It is amazing how good it feels to put some well-deserved profits in our pockets.

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May 17

The simple mistake bears keep making

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 popped 1.2% Wednesday, bouncing back from Tuesday’s mild selling as the index closed at the highest levels in over two weeks.

One day down, the next day up. I’ve been reminding readers for weeks that this is a choppy, sideways market, not one on the verge of collapse. As I wrote last week:

There have been more than enough excuses for this market to break down, yet every time the bears try, stocks bounce back in their face. A market that refuses to go down will eventually go up.

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Wednesday’s big bounce was not a surprise. If inflation, rate hikes, employment, banks, or debt ceilings were going to break this market, it would have happened by now.

Bears betting against this market are giving money away. Not that I mind, because their denial puts money in my pockets. But just because they are too stubborn to learn doesn’t mean we should allow them to scare us into following them down the drain.

I’m not expecting a big breakout anytime soon, especially since we are falling into the slower summer months, but a push to 4,200 resistance and even a modest poke above this level is in our near future. Maybe it doesn’t happen until next week or the week after, but no matter what the cynics claim, this market wants to go higher, not lower.

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May 15

What makes this market so easy to read right now

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 finished Monday up 0.3% following another back-and-forth session.

Another day gone and not much changed. We are transitioning into the slower summer months and shouldn’t expect big fireworks. Rate hikes are paused, inflation is inching lower, employment remains robust, and the economy is slowing in a constructive, soft landing kind of way.

The debt-ceiling debate is ramping up, but in a divided government, this is standard operating procedure. Anyone expecting a deal before the deadline doesn’t understand how negotiations work.

If this is like all of the other contested debt ceiling standoffs, it will get pushed to the edge, and it will get ugly, but ultimately, something will get passed. The consequences are too great for this to end any other way. US debt got downgraded in 2011 when Republicans threatened default and the shockwaves that were created won’t be forgotten anytime soon.

Without a doubt, our politicians can screw this up, but it will get resolved eventually because there is no other choice. So from that perspective, as a trader, I would love to see stocks crash over the near term because buying irrational discounts is the easiest way to make lots of money very quickly.

At the same time, most stock owners know this too, so I doubt many will hit the panic button and sell their favorite stocks at steep discounts no matter how cantankerous this debt ceiling standoff gets.

If we could only be so lucky to see a big selloff, unfortunately, I don’t think we will be that fortunate. Until something changes, I’m sticking with what is working and that is waiting for the index to rally up to, and through 4,200 resistance. The market is taking its time, but as I’ve been saying for a while, something that refuses to go down will eventually go up.

Stocks climb a wall of worry, and so far, everything is still pointing higher.

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May 11

Why the trend is still higher

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Thursday’s session took the S&P 500 on another wild ride as steep opening losses bounced off of those early lows. While the index finished down -0.2%, that was actually a fairly robust ending to a day that traded as low as -0.7%.

As I’ve been saying for a while, this is a choppy sideways market and it is handing these whipsaws out in spades. One day’s up becomes the next day’s down.

But if we zoom the chart out and look at the daily and weekly patterns, the market is actually trading well with multiple bounces off of 4,050 support.

There have been more than enough excuses for this market to break down, yet every time the bears try, stocks bounce back in their face. A market that refuses to go down will eventually go up.

It is a worrying sign if the market is refusing to rally on good news, but the sentiment is overwhelmingly bearish as trader chatter continues to obsess over inflation, interest rates, tight employment, bank failures, and a looming recession.

There is a popular saying in the market that stocks climb a wall of worry, and the indexes trading near multi-year highs is a classic example of that.

For all the excuses the market has to go down, it keeps going up. Rather than argue with the market, follow its lead.

Until something changes, keep buying the bounces. At this point, it is only a matter of time before we are testing 4,200 resistance and even poking our heads above this key level.

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May 10

How smart money handled Wednesday’s wild ride

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 finished Wednesday’s session 0.4% higher after inflation fell to 4.9% and this key metric is now at the lowest level in two years.

While the above statement makes it seem like Wednesday was a perfectly reasonable session, lift the hood and you see it was anything but. An 0.8% opening gain disintegrated into a 0.5% loss before bouncing nearly 1% to finish up 0.4%.

Curbing inflation is critical for the Fed and the economy, so obviously a lot of investors were paying attention. The result fell in the middle of the road, not too hot and not too cool, but that didn’t stop impulsive traders from overreacting to it.

But this impulsive behavior isn’t new. This is a volatile market and traders have been overreacting to headlines and price action for a long time.

For as wild as the ride was, Wednesday’s late rebound confirms this market is still on solid ground and that 4,200 is still the target. But as is usually the case, getting there is anything but a smooth ride.

As someone positioned for the bounce up to 4,200, the midday tumble was disappointing and it even convinced me to lock in some of Friday’s profits proactively. But just because I sell a position doesn’t mean I’m giving up on it. As easy as it is to buy back in, we should never be afraid of getting defensive when something doesn’t feel right.

While we can’t jump every time we see our shadow, there are instances like Wednesday when the market does something unexpected. As much as I liked Friday’s rebound, I’m not willing to ride this position back into the dirt and I always have a backup plan in case things go wrong.

But just as important as getting out is being willing to get back in after we recognize the weakness was a false alarm. Sometimes we get lucky and the false alarm moves far enough that we can buy back in at even lower prices. Other times, like Wednesday, the whipsaw is so compressed that we are lucky to get back in near where we got out.

It is a hassle to sell and then buy back a few hours later, it sure beats allowing a profitable position to turn into a loser.

Wednesday was a wild session, but the refusal to break down means the near-term trend is still higher.

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May 09

A market that refuses to go down will eventually go up

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 slipped half a percent Tuesday as it continues digesting Friday’s big gains.

While it is more fun to watch the index stack big back-to-back gains, trading is rarely that easy. But as long as the gains are bigger than the losses, the bulls are still in control.

The two near-term points to watch are Monday’s highs and Friday’s lows. Break through either of these and prices will keep going in that direction. On the upside, 4,200 is easily within reach. On the downside, 4k and the 200dma loom large.

Which will it be? The answer you get largely depends on the speaker’s bias. But for those of us without a bias, the market is trading well right now and that can’t be ignored. Prices bounced twice off of 4,050. If this market was as fragile and vulnerable as the critics claim, the selling would have accelerated, not dried up and bounced.

Minor red days like Tuesday are a normal and healthy part of every move higher. Two steps forward, one step back. Until proven otherwise, we continue giving this market the benefit of the doubt.

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May 08

Why Monday’s boring price action is bullish

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 finished Monday’s session up 0.1%. While it is hard to get excited about such small gains, boring markets are bullish, especially ones following moves as big as Friday’s 1.9% rebound.

Stocks retreat from overbought levels quickly, so the longer we hold Friday’s gains, the more real they become.

This remains a choppy market, and we should expect lots of back-and-forth, but at the same time, something that refuses to go down will eventually go up. The fact we keep holding near 4,200 resistance means we will eventually hit and even exceed this widely followed level soon.

From Friday evening’s free post:

Friday gave us the bounce we’ve been waiting for, and there isn’t much to do other than keep holding, adding more, and lifting our stops. We will be locking in profits soon, but we still have upside left, and it is worth holding a little longer.

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Monday’s price action didn’t change anything. Keep holding Friday’s rebound and make sure our stops are at least as high as our entry points, making this a low-risk trade.

Slow is boring, but I don’t mind boring when it is profitable.

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May 05

The simple mistake both bulls and bears keep making

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 finished Friday sharply higher as Thursday’s second thoughts are ancient history. The index closed up 1.8% following strong earnings from AAPL and a robust monthly employment report.

The cynics claim strong employment is bad for stocks, but the market no longer falls for the “good is bad” argument, and the index reclaimed the previous two days of selling.

As I’ve been saying for months, this is a choppy market and that means big reversals. Rather than jump on the bull/bear bandwagon every time the market approaches one end of the trading range, smart money is getting ready for the reversal.

And this is exactly what I told readers in Thursday evening’s post titled, “Why smart money is getting ready to buy the next bounce”:

[N]ow that the index slipped back near the April lows and the 50dma, we find ourselves on the other side of this pendulum. Rather than aggressively short this weakness, we should be getting ready for the next bounce. For shorts, that means locking in worthwhile profits. For everyone else, that means getting ready to buy the next bounce.

As I said earlier in the week, 4,200 is still very much in play and nothing has changed, the market is simply taking the long road to get there.

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Markets trade sideways 60% of the time, and this is one of those times. I still expect the index to challenge 4,200 over the next couple of weeks, but even that will only amount to a poke above this key level before slipping back into the trading range.

And I fully expect the sideways grind to continue as we transition into the slower summer months. If this market was going to break out or break down, it would have happened. The best play here is trading these small swings, taking profits, and then getting ready to go in the other direction.

Friday gave us the bounce we’ve been waiting for, and there isn’t much to do other than keep holding, adding more, and lifting our stops. We will be looking to lock in profits soon, but we still have upside left, and it is worth holding a little longer.

That said, our stops need to be at or above our entry points. There are zero excuses to allow a winning trade to turn red on us. As easy as it is to buy back in, pull the plug at our stops and then get ready to buy back in, which could be as soon as a few hours later. But as long as the keeps going up, we keep holding and lifting our stops.

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May 04

Why smart money is getting ready to buy the next bounce

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 slipped another 0.7% Thursday as traders continue digesting Wednesday’s Fed rate hike.

The Fed did what it said it was going to do and the market’s response has been cool but measured. Prices slipped as some of the most optimistic investors were disappointed the Fed didn’t hint at rate cuts later this year, but in a volatile world where 1%, 2%, and 3% daily swings are not uncommon, -1.4% over two sessions is hardly panic material.

Stocks go up and stocks go down, that’s what they do. Monday evening, I warned readers to start locking in worthwhile profits:

Now is the time to start protecting last week’s profits by lifting stops and even taking some partial profits proactively…The price action looks good, and 4,200 is still very much on the table, but this is the wrong time to be getting greedy and cocky. Anyone doubling down up here is exposing themselves to a very routine step back on our way higher.

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I had no idea the market would shed 100 points over the next three sessions, but that’s how these things go. Always has and always will. Last week was a nice bit of up and we’ve given back all of those profits this week. Easy come, easy go.

I can’t repeat this often enough, this is a choppy market and that means one day’s profits will become the next day’s losses. If we’re not taking worthwhile profits when we have them, we’re not going to have any profits left to take a few days later.

But now that the index slipped back near the April lows and the 50dma, we find ourselves on the other side of this pendulum. Rather than aggressively short this weakness, we should be getting ready for the next bounce. For shorts, that means locking in worthwhile profits. For everyone else, that means getting ready to buy the next bounce.

As I said earlier in the week, 4,200 is still very much in play and nothing has changed, the market is simply taking the long road to getting there.

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May 03

Why smart money keeps betting on stocks

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 slipped 0.7% Wednesday after the Fed raised interest rates 0.25% and suggested future rate hikes might not be needed.

The market initially rallied on the news, but Powell went out of his way to remind investors a decision to pause has not been made and further hikes are still possible. And the biggest let-down is the Fed didn’t give any hints that rate cuts are possible by the end of the year.

As expected, we got some good and some not-so-good. In the end, the market’s modest 0.7% giveback still leaves the index well within the recent trading range just under 4,200 resistance.

Fortunately, readers were ready for Wednesday’s modest reaction because it ended up exactly how I described it in Tuesday evening’s post:

[T]he Fed is not going to surprise us and we will get exactly what most people are expecting. That won’t stop impulsive traders from mashing the buy/sell button in the minutes after the announcement, but after a flurry of impulsive trading, the market will settle down and go back to what it was doing previously, which is consolidating recent gains under 4,200 resistance…

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Corporate earnings have been good enough, first-quarter inflation was moving in the right direction, and the Fed didn’t crash the party. This continues to be a “less bad than feared” rebound and the lack of “worse” is allowing stocks to hold near 52-week highs. Not bad, all things considered.

We get the monthly employment report on Friday, and all indications are it will be more of the same. If something was going to break this market, it would have happened by now. This week’s Fed meeting didn’t change anything, and despite Wednesday’s modest givebacks, 4,200 is still the near-term target.

Keep buying bounces and collecting worthwhile profits when we have them. Volatility remains elevated, but as long as we keep getting more up than down, smart money is betting on this market, not against it.

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May 02

Why savvy bulls were ready for Tuesday’s retreat

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 took a step back Tuesday, shedding -1.2% ahead of Wednesday’s Fed meeting and rate decision.

Two steps forward, one step back. Nothing unusual or surprising about this price action. As I wrote Monday:

Now is the time to start protecting last week’s profits by lifting stops and even taking some partial profits proactively. We don’t need to harvest a lot, but it is amazing how refreshing it feels to lock in some profits and put our minds at ease. A little security is all we need to ride through the inevitable chop as we continue challenging 4,200 resistance over the next few days and weeks.

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With a nice pile of profits locked in Tuesday morning, we were eagerly looking for the next buying opportunity. And as luck would have it, we didn’t need to wait long before the selling stalled and bounced in mid-morning trade.

As easy as it is to buy back in, there are zero reasons not to take worthwhile profits when we have them. And in many instances, we get back in at lower prices, like we did Tuesday afternoon. (Start small, get in early, keep a nearby stop, and only add to a trade that is working.)

A big portion of Tuesday’s second thoughts was driven by fear of the Fed’s policy announcement Wednesday afternoon. While most people expect a 0.25% rate bump and pause after that, until the decision is locked in, there is some risk. And with the index bumping up against 4,200 resistance, traders were overcome by a bout of second-guessing.

As for Wednesday, the Fed is not going to surprise us and we will get exactly what most people are expecting. That won’t stop impulsive traders from mashing the buy/sell button in the minutes after the announcement, but after a flurry of impulsive trading, the market will settle down and go back to what it was doing previously, which is consolidating recent gains under 4,200 resistance ahead of a move to challenge and even break through this key level.

Nothing changed Tuesday and nothing will change Wednesday. Stick to the plan and that is buying bounces ahead of a move above 4,200 over the next week or two. And as always, this is a choppy market and that means locking in worthwhile profits when we have them. Buy the dip, sell the bounce, and repeat as many times as the market lets us.

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May 01

How savvy traders avoid falling for the market’s tricks

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 spent Monday dancing around breakeven as traders get used to these new highs. As is often the case, the big gains came early and fast, meaning anyone waiting for last week’s confirmation is left with little more than crumbs.

Luckily, readers of this blog were ready for Thursday’s big pop. As I wrote last week:

The market loves to convince us we are wrong moments before proving us right. As paradoxical as it seems, [last] Tuesday’s bloodbath could actually turn out to be very bullish if the market bounces over the next few days. That’s because this reflexive selling is purging the last of the dead weight and clearing the way for the next leg higher.

Well, wouldn’t you know it, last Tuesday’s bloodbath was, in fact, a false flag that cleared the way for these higher prices.

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As for what comes next, even though the market seemed stalled on Monday, it still has upside remaining, and I expect it to break above 4,200 over the next few days or weeks. Unfortunately, riding this echo won’t be anywhere near as easy, quick, or profitable as catching last week’s 120-point rebound across two sessions.

But that’s the way this goes. The early bird gets the worm, and in this case, that means making the hard trade when it feels certain to fail. Buy when we don’t want to buy and sell when we don’t want to sell…

Now is the time to start protecting last week’s profits by lifting stops and even taking some partial profits proactively. We don’t need to harvest a lot, but it is amazing how refreshing it feels to lock in some profits and put our minds at ease. A little security is all we need to ride through the inevitable chop as we continue challenging 4,200 resistance over the next few days and weeks.

The price action looks good, and 4,200 is still very much on the table, but this is the wrong time to be getting greedy and cocky. Anyone doubling down up here is exposing themselves to a very routine step back on our way higher.

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Apr 25

Is it time to panic?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Traders hit the sell button Tuesday when an echo of last month’s bank crisis reverberated through the market and the S&P 500 tumbled -1.6%. And so continues the swinging pendulum of sentiment.

The thing about Tuesday’s banking headlines is these reports of massive outflows are old news. This isn’t what is happening now, but an autopsy of what occurred last month. If someone is freaking out over these headlines today, they are waaaaaaay late to the party.

We need new and unexpected headlines to break this market and as we learned last month, trouble at regional banks isn’t enough. If it was going to happen, it would have happened.

The market loves to convince us we are wrong moments before proving us right. As paradoxical as it seems, Tuesday’s bloodbath could actually turn out to be very bullish if the market bounces over the next few days. That’s because this reflexive selling is purging the last of the dead weight and clearing the way for the next leg higher.

The key is we need to bounce. Without that bounce, the selling could feed on itself for a few more days and go further. But without new and meaningful headlines to convert confident bulls into fearful bears, the selling will stall, and this dip won’t turn into anything more than a routine step back on our way higher. At this point, 4,200 resistance is still very much on the table.

While I remain optimistic, this wave of selling demonstrates why it is better to be a little late than a lot early. 4,200 is still very much in the cards, but there are zero reasons to commit early and hold a dip under 4,100. Savvy traders don’t buy dips, they buy bounces. This is a small but critical distinction.

As I wrote in Monday night’s free blog post:

While Bulls and bears love to place their bets ahead of time, I like waiting for the move to start first. A nice bounce Tuesday will be the green light to give this trade a shot.

As it turned out, Tuesday’s bounce never arrived and I was left watching the bloodbath from the sidelines. Which wasn’t a bad place to be. In fact, Tuesday’s selling works to my advantage because it lets me get in at even lower prices when the inevitable bounce finally arrives.

Maybe we bounce Wednesday. Maybe it doesn’t happen until Thursday, Friday, or even next week. But a bounce is coming because it always does. But until then, the lower we go now, the better it is for me.

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