Category Archives for "End of Day Analysis"

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And more than just taking away weak owners’ votes, these worrywarts have been replaced by confident dip-buyers.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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Apr 24

Why smart money is getting ready for the continuation higher

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 wavered between modest losses and small gains through Monday’s sessions.

While sideways is not as much fun as up, the fact most owners ignored every dip over the last few weeks tells us a lot about the market’s mood. If this market was going to crack, it would have happened by now. Instead, most owners shrug and keep holding.

It was wise to get cautious and lock in worthwhile profits a couple of weeks ago when we first got to these levels, as I wrote back on April 3rd:

Stocks move in waves; they always have and always will. After a nice run like that, rather than pat myself on the back for profiting from March’s reversal, I’m getting nervous that too much of a good thing can end poorly for anyone that holds too long.

Don’t get me wrong, I’m not calling this a top. Momentum is far more likely to continue than it is to reverse, but with 300 points of upside in our rearview mirror, this is the wrong time to be getting greedy. Savvy traders are taking worthwhile profits and getting ready for the next opportunity.

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But after the typical step-back failed to materialize, we have to start considering the next move will be “high getting even higher.”

As I’ve said countless times before, something that refuses to go down will eventually go up. At this point, this looks like up is only a matter of time. While it isn’t hard to figure out what the market is going to do next, the challenge is always getting the timing right. More often than not, the key isn’t what trade to make, but when to make it.

As I wrote last week, this sideways grind could start moving at any time and that means we need to be ready for it. 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.

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Apr 19

Why this overbought market will keep going higher

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 started Wednesday’s session -0.5% in the red as the index continues struggling for a direction under 4,200 resistance.

For all the naysayers attacking this “overbought” market, Wednesday morning’s weakness failed to trigger a wider wave of selling and it only took a few hours before prices bounced back to breakeven.

While the index finished flat for the day, that’s actually a resilient performance for stocks. If this market were as fragile and vulnerable as the critics claim, the selling would have accelerated, not stalled and bounced.

Lucky for readers, we recognized the market’s indecisiveness a while ago and used that insight to our advantage. As I wrote last week:

The lack of a breakout or a breakdown is frustrating the people who are trading in anticipation of these things. As I’ve been saying for a while, this is a range-bound market and that means lots and lots of reversals. If a person has profits and they are not collecting them, those profits will be gone in days, if not hours. Savvy traders know this is the environment to stay nimble and take profits early and often.

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Novice traders love to claim the market is rigged when it doesn’t do what they want. The thing I never understand about this argument is if these traders know the market is rigged, why don’t they use that insight to follow the rigging and print money???

Don’t fall for lame excuses. If you lose money, it means your trading thesis is wrong, plain and simple. Rather than accuse banks or the Fed of cheating, recognize your mistake and change your approach. That’s the only way to survive the market over the long haul.

As for what comes next, last week I was wary of a near-term step back following March’s big run. But holding near the highs for a few weeks suggests these levels are real. As I often remind readers, a market that refuses to go down will eventually go up.

As high as stocks seem, it wouldn’t surprise me to see the index break through 4,200 over the next few days or weeks. I don’t expect a big breakout, but poking our heads above this key resistance level seems all but inevitable. If we were going to crash, it would have happened by now.

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Apr 14

Why stocks are not ready to go higher…yet

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 poked its head above multi-month highs moments after Friday’s open, but those early gains were as good as it got and the index skidded into the red minutes later.

That said, Friday’s -0.2% loss was fairly trivial and hardly describes panic selling, especially considering the index was down nearly -1% in midday trade.

March’s rebound is running out of momentum near 4,200 resistance. But this shouldn’t surprise readers of this blog because I’ve been saying stocks have been rangebound for months. As I wrote Thursday evening:

While [Thursday’s] short squeeze produces quick profits for those of us lucky enough to be positioned on the right side of the reversal, the downside of short squeezes is they don’t have much staying power. As nice as riding Thursday’s wave higher was, savvy traders are standing next to the exits if they are not already locking in worthwhile profits.

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Well, it didn’t take long for the air to start coming out of Thursday’s short squeeze. One day’s up becomes the next day’s down. If a person isn’t taking profits when they have them, they will be sitting on losses a few hours later.

Savvy traders adopted an anti-bear and anti-bull outlook toward this market. March’s dip to the lower end of the 3,800 trading range wasn’t a prelude to a huge crash to multi-year lows, it was a buying opportunity to ride the next wave higher. And this rally to the upper end of the trading range doesn’t foretell of huge gains for as far as the eye can see. Instead, we are running out of buyers and on the verge of slipping back into the heart of the trading range.

A breakout is coming, but we need buyers to start feeling more greedy than fearful at these heights. It will happen, just not right now. Until then, keep taking profits early and often because if we don’t, the market will snatch all of those profits back.

At this point, look out for further cooling next week and ambitious traders can short that weakness. For everyone else, wait for the next bounce. Don’t worry, it will come along much quicker than most people expect.

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Apr 13

Why bears should have seen this rebound coming

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 surged 1.3% Thursday after we got a few more pieces of data showing inflation continues falling.

Sure, inflation’s retreat is slower than most hoped for or even expected, but most sensible people agree we avoided the worst-case scenario the pessimists were predicting last year. Less bad-than-feared has been the name of the game this year as stocks continue trading near recent highs.

If we look at the headlines that allegedly triggered Thursday’s surge, they are fairly benign. That means it wasn’t the headlines driving this one-way buying frenzy, but traders reacting to the price action. More specifically, overly ambitious bears getting blown out of their short positions.

Lucky for readers of this blog, Thursday’s reversal didn’t catch us off guard. As I wrote Wednesday evening:

The lack of a breakout or a breakdown is frustrating the people who are trading in anticipation of these things. As I’ve been saying for a while, this is a range-bound market and that means lots and lots of reversals. If a person has profits and they are not collecting them, those profits will be gone in days, if not hours.

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While a short squeeze produces quick profits for those of us lucky enough to be positioned on the right side of the reversal, the downside of short squeezes is they don’t have much staying power.

As nice as riding Thursday’s wave higher was, savvy traders are standing next to the exits if they are not already locking in worthwhile profits.

As I’ve been telling readers for months, this is a back-and-forth market, not a directional one. While the headlines are less-bad-than-feared, that’s a long way from being good enough to send stocks back to record highs. Until something changes, expect stocks to continue trading sideways inside the 3,800-4,200 trading range.

No doubt it is hard to pull the plug on a trade that’s working as well as buying Thursday’s rebound, but it is far more painful to watch a winning trade turn into a loser because we got greedy and held too long. Just ask greedy bears that watched all of Wednesday’s short profits vanish into thin air.

And you know what? If we end up collecting profits too early because Thursday really was the start of the next big run to record highs, nothing prevents us from buying back in on Friday or next week.

Until proven otherwise, I will continue taking profits early and often because up to this point, the reversals have never been far away. If we’re not taking profits, then we will get stuck taking losses a day or two later.

This pattern will change at and we will eventtually get a bigger directional move, but this is not that point.

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Apr 12

How savvy traders are approaching this indecisive market

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Wednesday down 0.4% after the monthly inflation report dipped to 5%, the lowest reading in nearly two years.

Stocks reflexively rallied on the news of falling inflation. However, the midday strength evaporated when the Fed’s latest meeting minutes revealed they were still contemplating another rate hike at their next meeting.

The good and bad cancel each other out and the market finds itself stuck in the middle of its latest consolidation near 4,100 resistance.

At this point, it would be hard for either bulls or bears to claim recent price action supports their arguments. The March rebound has clearly stalled near 4,100 resistance as prospective buyers grow leery of these elevated prices. But at the same time, bears’ widely predicted collapse from “too high” is nowhere to be found.

At this point, it feels like the market is settling into “just right” as it waits for the next meaningful data point. Stock prices would have reacted far more aggressively if either of Wednesday’s headlines were a surprise. Instead, the market expected inflation to cool modestly and for the Fed to contemplate another rate hike.

The lack of a breakout or a breakdown is frustrating the people who are trading in anticipation of these things. As I’ve been saying for a while, this is a range-bound market and that means lots and lots of reversals. If a person has profits and they are not collecting them, those profits will be gone in days, if not hours.

Savvy traders know this is the environment to stay nimble and take profits early and often. The next big directional trade is coming, but this isn’t it. If you are not taking profits when you have them, you will end up with a pile of losses.

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Apr 11

Why I’m sitting on my hands

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Tuesday almost exactly where Monday’s session ended.

The flat trade over the last week is proving both bulls and bears wrong. As I’ve been writing for a while, this is a sideways market, not a directional one.

Economic headlines are largely stable, meaning bulls are not turning into bears and bears are not turning into bulls. When few people are changing their minds, stocks end up rangebound.

Sure, it’s been a nice run from the March lows, but now that we are at the upper end of the trading range, rather than get greedy and keep holding, savvy traders are collecting profits and getting ready for the next trade.

Trading is a game of managing risks and rewards. March’s run consumed a whole lot of reward, meaning there is far less upside left for those still holding. Pushing up near multi-month highs means the risks of holding is greater than they were at lower levels.

At the same time, only fools are rushing to short everything they can get their hands on because “stocks are too high.” Momentum is far more likely to continue than reverse, so anyone betting against recent strength is going against the odds.

We are traders and we want to trade, but sometimes the best trade is simply waiting for the next trade. Making money is a lot easier when the risk/reward is stacked in our favor.

Maybe we get an unexpected headline that sends us back to the lower end of the 3,800-4,200 trading range. Or maybe something good happens and we push through old resistance. But until either one of those things actually happens, I’m happy watching this from the sidelines.

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Apr 05

How savvy traders know when good enough is good enough

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 slipped another -0.3% Wednesday as the index continues struggling with 4,100 resistance.

While everyone is busy arguing about the latest headlines, what’s on the front pages doesn’t impact the economy and thus, is not important to the stock market. Instead, this latest bout of selling is simply an exhale following last week’s big run to multi-month highs.

Lucky for readers, we were ready for this stalling. As I wrote Monday night:

Stocks move in waves; they always have and always will. After a nice run like that, rather than pat myself on the back for profiting from March’s reversal, I’m getting nervous that too much of a good thing can end poorly for anyone that holds too long.

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Now, to be clear, I’m not calling Tuesday’s opening highs a top, but there always comes the point where we have to decide that good enough is good enough.

Risk is a function of height, meaning these are the riskiest levels since early February. And more than that, March’s 300-point rebound consumed a whole lot of near-term upside. Less reward and higher risk equal an unfavorable time to be buying or holding stocks.

Sure, momentum is higher and that means prices can continue drifting to even higher levels, but all good things must come to an end, and the odds are working against March’s rebound at these prices.

Until proven otherwise, this is a choppy, sideways market and we are currently near the upper end of the 3,800/4,200 trading range. Common sense makes this the place to take profits and prepare for the next trade.

And guess what? If the short squeeze continues next week, there is nothing that says we cannot buy back in and enjoy that ride higher. Just because we sell doesn’t mean we have to give up. We are always in the fight, but savvy traders are not naive enough to push their luck when the risk/reward is no longer working in their favor.

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