Category Archives for "Free Content"

Tales of a stubborn bull market and a warning for $GME owners

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 lost 0.8% Tuesday in the second-largest give-back over the last few weeks. Yet even when combined with last week’s -1.5% down day, the index remains within 1.6% of its all-time closing high. Hardly bearish material.

That said, you have to give the bears credit for their persistence. But so far they have been unable to crack this resilient bull market. No matter what is thrown at this rally, it just keeps shrugging off the bad news. While the cynics have been wrong 100 times up to this point, they insist this time they are finally right. Could they be right? Sure. But will they be right? No, probably not.

Successful trading is a game of probabilities and right now odds favor a continuation. This is a stubbornly resilient market and rather than fight the stubborn strength, we should be going along for the ride.

I’d love it if this market cracked wide open and panicked sellers started giving away stocks at huge discounts. Unfortunately, I don’t see that happening. We need to get cautious if Tuesday’s dip continues under Friday’s intraday lows. But until then, stick with what has been working, which is holding for higher prices.

GME reported earnings after the close and they missed pretty big on both the top and bottom lines. That didn’t stop after-hours traders from bidding up the stock right after the earnings release. Unfortunately, that initial strength was short-lived and the stock ultimately closed down 15% by the end of the after-hours session.

I’ve been skeptical of the sustainability of this latest “echo” and it seems the bounce’s momentum is quickly petering out. As I’ve been telling Premium subscribers for over a week, once this thing falls under $200, it ain’t coming back. There are only so many fools willing to pay $200 for a $20 stock and it looks like we finally ran out of them.

This was a momentum trade and now that the momentum’s gone, there is no reason to own this. Hopefully, regretful buyers from the first runup were able to get their money back during this impressive echo. But if they didn’t, they have no one to blame but themselves.

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Why the $SPX’s bull market isn’t dead yet and a trading plan for $TSLA

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The week started well for the S&P 500 as it continued Friday’s bounce off of 3,900 support. Treasury yields moderated modestly and slipped under 1.7%. While not a big pullback, the decrease was enough to put stock traders in a dip-buying mood and the index is back within 1% of last week’s record close.

While the stock market is trading well and this resilience would be a big green light to start buying more under more conventional circumstances, I have a lot less confidence the worst is over in the bond market. In fact, I fully expect Treasuries to challenge 2% over the next few weeks.

Bond investors are human beings and prone to the same emotional mood swings as stock investors. That means these large moves tend to go way too far before eventually moderating. And in this instance, 2% seems to be the next target.

But as long as that move to 2% is relatively measured and turns into capitulation before retreating back to a more manageable 1.5%, this rise in yields shouldn’t threaten the bull market. Instead, this will simply be another bump on the stock market’s way higher.

That said, all bets are off if the bond selling intensifies and yields shoot past 2% and keep going. That’s the worst-case scenario. And as is usually the case with the worst-case scenario, the likelihood is of this outcome is slim. Most of the time reality turns out less-bad than feared. But that doesn’t mean equity investors won’t overreact to the risks over the near-term.

I really like the way the S&P 500 bounced off of 3,900 support and this move is buyable as long as the index remains above 3,900. Tumble under 3,900 on Tuesday and we need to pull the plug and reevaluate.

TSLA is struggling to add to March’s bounce off of $600 support and the rebound appears stalled under $700. The bounce is still holdable with a stop near $600, but if prices fall under $600, get out and even consider shorting the weakness. If $600 support doesn’t hold, the next obvious support level is $400. IMO, there is no reason to sit through a 33% pullback if we don’t have to. And if the stock bounces back above $600, it is easy enough to buy back in.

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Why bears got the interest rate trade wrong and what’s coming up for TSLA

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

Thursday was a good day for the S&P 500 with the index notching yet another record close. That’s miles from last week’s apprehension over the looming stock market collapse.

It’s been a few weeks since the last record high, but more important is this rebound extends the trend of higher-highs. As much as the cynics try to bash this market, fragile markets don’t keep making new highs. That confirms this a strong market, not a weak one.

The other nice thing to see Thursday was was a modest decoupling between bonds and stocks. Previously, stocks were rising and falling at the mercy of the bond market’s whims. Thursday, the bond market was mostly flat while stocks staged this nice rally to record highs.

But this shouldn’t be a surprise. As I wrote last week, stock investors are not afraid of these historically low 1.5% interest rates. They were worried this surge would continue to 3% and beyond. But so far, yields are settling in around a very reasonable 1.5% and that level seems good enough for the equity market.

Every pullback feels real. By rule, it has to. That’s because if it didn’t feel real, no one would sell and prices wouldn’t drop. Buying last week’s bounce was hard, but so far it looks to be the right call.

The thing to remember is risk is a function of height. The higher we are, the further we have to fall. And the opposite is true. The more the indexes pullback, the closer we are to the next bounce.

It is hard to buy when everyone else is predicting a collapse, but that is often the safest time to be buying. If a trader waited until today’s “conformation”, they would be getting in at record highs. The trader that took a chance on last week’s bounce already has a nice profit cushion protecting their trade.

Start small, get in early, keep a nearby stop, and only add to a trade that is working. That’s how we keep ourselves out of trouble.

TSLA is riding on the coattails of the index’s rebound and has bounced hard off of Monday’s lows. Was this capitulation and enough to end the 40% collapse from the highs?

That’s a good question we cannot answer it right now. It’s been a long time since this stock followed anything remotely close to fundamental analysis. That means this is a momentum trade and either momentum is still behind this stock or it’s not. With a PE measured in the thousands, there is no option other than another race higher or a spectacular collapse.

TSLA’s bounce is buyable above $600. On the other hand, this turns into a strong short if this rebound fizzles and the stock retreats back under $600.

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Why the S&P 500 is headed higher and the latest warning for GME owners

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Wednesday up as the relative calm in the bond market continues.

Bond investors are not fundamentally any different than stock investors. They are humans that feel the same tugs of greed and fear and are equally prone to overreacting to a selloff.

Chances are good a big portion of this latest runup in bond yields was triggered by a wave of contagious herd selling that got carried away. And that is the way equity investors are treating this as they buy last week’s dip.

The thing to remember in both stocks and bonds is most owners would rather keep holding than sell what they have. These episodes of runaway selling are triggered by fear. But after several days of calm, that fear dissipates and investors are able to make more rational trading decisions. And those rational decisions almost always include continuing to hold.

For the time being, the S&P 500 is acting well and there is only one way to trade this. Keep holding for higher prices with stops in the lower 3,800s. The advantage of buying the dip early is now we have a profit margin to protect us if the selloff resumes. Move your stops up to your entry points and see where this goes.

Silliness is returning to GME and the stock was up $100 Wednesday afternoon. That was until it fell $175 in a few short minutes. The size of the collapse was spectacular and shows just how thin the buying is in this stock. While most GME owners are “holding with diamond hands”, there are not many fools left willing to pay $300 for a $20 stock. All it takes is a few owners to start locking in their profits and this will get real ugly, real quick.

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Why Wednesday is so critical for this rebound

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 continues bouncing between big gains and losses depending on what is going on in the bond market that day. Treasury yields fell Tuesday and that sent stocks sharply higher as equity investors let out a sigh of relief.

The S&P 500 is trading really well and extending last week’s decisive capitulation and rebound. I love the way stocks are behaving but I have far less conviction about what is going in the bond market. That makes it hard to have a lot of confidence in the sustainability of this equity bounce because it is built entirely on the bond market keeping its cool.

But as I often write, the best trades always have uncertain starts. By the time we get more clarity, the discounts will have long since disappeared. And that means we have to get in before it feels safe.

I’m not convinced this is the last we’ve heard from the bond market. In fact, I believe higher rates will be responsible for the next recession and bear market. But this is a 6-12 months story, not a right now story. At least for the time being, equity investors are feeling better and there is a good chance this week’s bounce will stick.

Without a doubt I could be wrong, but for that to happen, we need to make a lower-low. Last week’s dip set a fresh low mark around 3,750 and as long as we remain above this level, everything is progressing well enough. While I’d love to see a new higher-high, at this point, avoiding another down wave is far more important.

That makes Wednesday a critical day for the market. Extend the rebound and all is good. Violate 3,800 support and lower-lows are in our immediate future.

The best part of being aggressive and buying the bounce early is that gives us a nice margin to play with. We should have already moved our stops up to our entry points. Few things are better than free trades and even if buying this bounce turns out to be a mistake, it won’t cost us much, if anything at all.

That said, I’m still expecting higher. Hold it together Wednesday and everything is setting up for a move to fresh highs.

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Is complacency finally catching up to the market?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 started Monday with nice gains and it looked like we were finally shaking off the Treasury yield blues. Unfortunately, those early gains fizzled and the index ended with the eleventh loss in three weeks.

While eleven down days out of fourteen trading sessions sound absolutely dreadful, amazingly, the index is little more than 2% from all-time highs. How does that happen???

As much as bears are trying to hype the inflation fear-mongering, most owners are not falling for it and are sticking with their favorite stocks.

While market folklore frequently warns of complacency, the thing most people forget to mention is just how long complacency lasts before the fall. Quite simply, when confident owners refuse to sell, prices remain stubbornly resilient.

How much longer can this complacency last? Well, if there is one thing we know about brutal selloffs, they are shockingly quick. At the rate this pullback is moving, the market is dropping an average of 0.14% per day. That qualifies as many things, but shockingly fast is not one of them.

As long as the index remains above 3,800 support, there is nothing to do but continue giving this market the benefit of doubt.

While this bull market shrugged off dozens of bearish headlines over the last year, maybe this interest rate story is the one that finally takes us down. But if yields are going to take us down, the first thing that needs to happen is for the index to fall under 3,800 support. Until that happens, keep trading this from the long side.

If there is one thing that gives me pause about this bull market, it is the absolutely dreadful price action from the FAANG highfliers. FB, AMZN, AAPL, NFLX, and GOOGL, none of these stocks can get out of their own way and most are down more than 15% from recent highs. If something takes this market down, it will be a lack of leadership from these best-of-the-best companies.

On the other hand, if this bull market can hold it together for a little bit longer, these 15%+ discounts in these bluechip stocks will prove to be a great opportunity to buy more.

At this point, there are only two ways this plays out. Either the FAANG stocks catch up. Or they take everything down with them. I’m giving the index the benefit of doubt, but if the FAANG stocks continue lagging, I will have to reevaluate my outlook.

(As poorly as the FAANG stocks are doing, TSLA is in an entirely different category and I’ll cover this former darling Tuesday evening.)

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Was Friday capitulation or another false bottom?

By Jani Ziedins | Weekly Analysis

Free Weekly Analysis: 

Friday was another choppy session for the S&P 500 with the index traversing more than 150-points throughout the day.

The morning started off well enough with a nice opening gap that pushed the index back to 3,800 support. Unfortunately, those gains evaporated and turned red within a couple of hours. 10-year Treasury yields flared up again that that unleashed another wave of selling in the equity markets. But not long after the index challenged Thursday’s lows, the selling capitulated and stocks bounced hard, rallying 100-points from the intraday lows and closing up nearly 2%.

When it was all said and done, this choppy week crashed through 3,800 support and it still managed to close 0.8% in the green. As hopeless as things felt Thursday afternoon, we actually finished the week in pretty good shape.

As I wrote previously, equity investors are not afraid of 1.5% Treasury yields. It wasn’t all that long ago when 1.5% was a record low. And in fact, most equity investors would be thrilled if 1.5% rates were our new reality. But that’s not what investors are afraid of. They worry this jump to 1.5% will continue to 3%, which is a much different proposition when it comes to interest rates and stock valuations.

While I was cautious following Thursday’s collapse under 3,800 support, I also warned readers the bounce could be just around the corner:

I have no idea how much further this selloff will go, but chances are it will only last a few days and that means shorts need to be ready to lock-in profits quickly. Fight the urge to get greedy. Remember, this is still a bull market and these things bounce hard and fast. Hold a little too long and all of your short profits will evaporate.

It turns out my estimation of “a few days” was overly generous and in reality, we could have measured this violation of 3,800 support in hours.

I’m impressed with Friday afternoon’s bounce. Thursday’s violation undercut recent lows and could easily turn into this pullback’s capitulation point. In more normal times, I’d be embracing Friday’s bounce with open arms.

The problem is this time equity investors are not trading stocks, they are reacting to the bond market. Was Friday afternoon’s stabilization in Treasury yields the real deal? If so, all the lights around us are green. But if the bond market continues to struggle, the index will tumble even lower next week.

While I love the way stocks responded Friday afternoon, I have a lot less confidence in the bond market. But that’s the way this usually goes. Most of our best trades have very questionable beginnings.

At this point, as long as the S&P 500 remains above 3,800, stocks are ownable. If yields flare up again next week and the index retreats back under 3,800 support, lower prices are ahead.

Given how volatile things have been lately, we should have our answer pretty quickly on Monday. If prices retreat, sell. If the bond market calms down over the weekend and stocks rally Monday, buy. 3,800 is the tipping point and we should follow the market whichever way it goes next week.

While I’m cautiously optimistic about the indexes, it is a lot harder to find nice things to say about TSLA. At the depths of Friday’s collapse, the stock was down 40% from the highs of only a few weeks ago. Easy come easy go. If $600 doesn’t hold, unfortunately, $400 is the next logical support level.

TSLA’s bounce is buyable as long as the stock remains above $600. But all bets are off if prices violate $600 support again. At that point, it’s best to step aside and wait for the dust to clear.

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Who is in worse shape, the S&P 500 or TSLA?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Thursday was another bad session for the S&P 500. Not only was this the third loss in a row, but the previously rock-solid 3,800 support crumbled before our eyes.

As bad as this sounds, putting this pullback in perspective, today’s 3,768 close would have been a record high less than two months ago. This latest selloff only looks bad when compared to where we were a few weeks ago.

That said, it feels like sentiment flipped from half-full to half-empty following this latest runup in interest rates. As I wrote yesterday:

Even if this rise in yields is nothing more than another false alarm, the only thing that matters over the near-term is if equity investors believe this is the real deal. If they want to abandon the market and sell their favorite stocks at steep discounts, no one can stop them.

And that’s exactly what happened Thursday as the index crashed through support. This violation of 3,800 was shortable with a stop just above this level. At this point, proactive shorts should be moving their stops to at least their entry point, making this a free trade.

I have no idea how much further this selloff will go, but chances are it will only last a few days and that means shorts need to be ready to lock-in profits quickly. Fight the urge to get greedy. Remember, this is still a bull market and these things bounce hard and fast. Hold a little too long and all of your short profits will evaporate.

Jumping from the frying pan and into the fire, the S&P 500’s 5% loss pales in comparison to TSLA‘s 30% collapse. Back in mid-February, I warned TSLA owners to get defensive if the stock retreated under $800 support. And here we are a few weeks later, testing $600. And before anyone starts thinking the worst is behind us, a dip under $600 could easily fall all the way back to $400. I don’t think anyone needs to be told holding through a 50% pullback is an awful pill to swallow.

Savvy traders lock-in profits when everyone else is overcome with greed. And those same savvy traders are there to pick up the pieces when the crowd gets terrified and starts selling their stocks at steep discounts.

If a person locked-in profits back at $800, no doubt they are hoping TSLA tumbles all the way back to $400. I’m not sure this falls that far, but it will definitely get worse before it gets better.

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Why savvy bulls should be rooting for a larger pullback

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Everything seemed so promising for the S&P 500 Monday afternoon following the biggest up-day in nine months. Fast forward two sessions and everything feels different.

While the index hasn’t violated last week’s lows, retesting support so soon after bouncing off of it is never a good sign. We want to see a surge of relief buying carry us higher, not waves of nervous selling knock us back down.

And while I count myself as one of the bulls, I recognized this retreat was a real possibility. As I wrote Monday evening:

The one thing that would make me reconsider all of this above is if the index retreats back to 3,800 over the next few days. If this bounce is the real deal, it shouldn’t look back. If prices retest support so soon after the bounce, the selling isn’t over.

All of this uncertainty stems from equity investors’ newfound obsession with 10-year Treasury yields. Yields go up, stocks go down. It doesn’t get any more complicated than that.

As I wrote last week, I don’t think this rise in yields is the real deal. Unfortunately, the market never once asked me what I think. Even if this rise in yields is nothing more than another false alarm, the only thing that matters over the near-term is if equity investors believe this is the real deal. If they want to abandon the market and sell their favorite stocks at steep discounts, no one can stop them.

I continue to believe this rise in rates is not the real deal and further, major bull markets do not turn off like a light switch. That said, even if this latest wobble ultimately resolves to the upside, things could get fairly bumpy over the near-term if nervous traders continue overreacting to these interest rate headlines.

If the S&P 500 undercuts 3,800 support, expect stock owners to start panicking as if the end is coming. That frenzied selling will likely last for a few days. But once it dies off, those of us that practice safe trading and sold at much higher levels have the cash to start snapping up all of those attractive discounts.

Speaking of safe trading strategies, by now most people who were following this rally higher with a sensible trailing stop have locked in their profits and are waiting for what comes next. Get ready because the bounce is coming. We just don’t know if this will bounce off of 3,800 again (boring!) or something much lower. (I’m hoping for much, much lower!)

Either way, be ready to put your cash to work. As always, wait for the bounce, start small, keep a near-by stop, and only add to a trade that is working. If the first bounce fizzles, no big deal, pull the plug and wait for the next one.

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A little good and a lot bad

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

On Monday the S&P 500 produced its biggest gain since last summer. On Tuesday it gave back a chunk of those gains. Two steps forward, one step back.

There is nothing wrong with a minor step back following such a large up-day. The key is hanging on to what’s left. Stay above 3,850 and everything is fine. Falling under 3,800 so soon after bouncing off this key support level tells us there is a serious demand problem and the selling is only just getting started.

This bull market deserves the benefit of doubt because it hasn’t let us down yet. Until we experience a more material breakdown, expect every dip to bounce within days, if not hours. If this market was fragile and overbought, it would have collapsed a long time ago. (Pro-tip for all the cynics out there, weak fragile don’t keep setting record highs.)

But enough about the indexes. One of the most noteworthy stock performances of the day came from ZM. It announced blowout quarterly results Monday after the close and the stock popped Tuesday morning. Unfortunately, that was as good as it got. Within hours, that impressive 8% opening gain turned into a dreadful -9% closing loss. That’s a 17% swing from the highs to the lows.

There are few things in the stock market that look worse than this. In fact, I cannot think of anything worse than such an epic midday collapse. Rather than cheer the news, most owners did their best impersonation of rats abandoning a sinking ship.

A stock that cannot go up on good news is in desperate shape and destined to keep going lower. ZM is a strong short as long as it remains below $400.

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The mistake bears are making

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 popped 2.4% in the biggest up-day since last summer. There wasn’t a clear headline driving Monday’s flurry of buying. Instead, this was a sharp snap-back from last week’s reflexive herd selling that got too carried away.

As I wrote last week, 3,800 was the tipping point. Either we fall over the edge or we bounce decisively off of support. Given the elevated volatility, there really wasn’t anything in between. And fortunately for the bulls, we got that decisive rebound off of support.

Like many people last week, I believe rising interest rates are what is going to kill this bull market. I just don’t think this is that time. Despite everyone trying to call a top, bull markets don’t die with the flip of a switch. Topping in a process that takes months.

We are only days removed from the last record high. If there is one thing we know about weak markets, they don’t keep setting new record highs. Until we see a clear pattern of lower-highs, assume this bull market is very much alive and well.

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

(Note: The one thing that would make me reconsider all of this above is if the index retreats back to 3,800 over the next few days. If this bounce is the real deal, it shouldn’t look back. If prices retest support so soon after the bounce, the selling isn’t over.)

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A simple trade for next week

By Jani Ziedins | Weekly Analysis

Free Weekly Analysis: 

It’s been a rocky couple of weeks for the S&P 500. Rather than bounce back from last week’s string of down days, we added to them. This week’s 2.4% loss was the largest since the final week of January and the second-biggest since November’s election.

As bad as that sounds, these periodic pullbacks keep turning into bullish higher-lows. At this point, the index remains above a trendline stretching back to just after the Covid lows. This pullback needs to keep going if it is going to do any meaningful technical damage.

That said, everything could change next week if the selling resumes. But until that happens, this isn’t anything more than a routine and healthy step-back on our way higher. Two-steps forward, one-step back. Rinse and repeat.

This leaves the market at a key tipping point. If this dip is truly like every other step-back over the last several quarters, the bounce is just around the corner.  Rebound back to the highs and nothing has changed. Extend the selloff and we are entering uncharted territory.

Investors have become fixated on rising 10-year Treasury yields. Is this finally the start of something new and we should be concerned? Maybe. But this bull market ignored a once-in-a-hundred-year global health pandemic, it shouldn’t surprise anyone if it shrugs off a jump in interest rates from 0.5% to the still absurdly low 1.5%.

Is the bull market dying? No, probably not. But we will learn a lot about the market’s intention next week when either the index bounces or it continues lower.

As for a trading strategy, it is pretty straightforward. The market is buyable above 3,800 and sellable under this level. It doesn’t get any more complicated than that.

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Why the cynics are right but they will probably still lose money

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Volatility exploded this week as the S&P 500’s last three trading sessions produced some of the largest intraday swings of the year.

The biggest wild card continues to be 10-year Treasury yields, surging from 0.5% last autumn to 1.5% today. While 1.5% is trivially small by historical standards and investors are not afraid of these 1.5% rates, they are afraid this surge will turn into 3% or even 5% over the next several months.

Remember, the investors don’t price stocks based on where we are today, but what they think we will be in six to twelve months.

Stocks are stupid expensive by conventional measures (forward P/Es, etc). But these valuations are actually reasonable given these historically low interest rates. That’s because the lower interest rates are, the more valuable future cash flows become.

The problem is one percent interest rates justify really high stock valuations. Four percent interest rates do not. And that’s the million-dollar question, where are interest rates headed?

With all of this money printing supporting the Covid economy, most people assume inflation and higher rates are inevitable. But you know what? They said the same thing after the Fed pumped the economy full of cash following the housing bubble and 2008 financial crisis. Quite a few “forward-thinking” hedge funds lost a ton of money a decade ago when they bet on higher inflation and ended up being wrong.

Now I will count myself as one of the people concerned about inflation and higher interest rates. As I described, these crazy high stock valuations are built on a foundation of low interest rates. Take that away and the whole thing comes crashing down.

I have little doubt higher interest rates are what will kill this bull market. The problem is I don’t know when it will happen. As I’ve written previously, these rallies go so much further and last way longer than anyone thinks possible. While we might already know how this ends, the demise is still probably a few innings away.

The one thing we know for sure is dying markets do not keep making new highs. If the S&P 500 returns to the highs over the next few days, all of this talk of the end is premature. If prices retreat under recent lows, then we have to take this more seriously.

The great thing about being independent investors and traders is we don’t have to predict the future. We are small enough that we can react to these developments in real-time as the future unfolds in front of us. If the market bounces tomorrow, buy and hold. If prices retreat under the lows, sell and even consider going short.

It doesn’t get any more straightforward than that. Volatility is picking up, meaning the next move will be large. We just need the market to pick a direction and then hang on.

My intuition and educated guess is higher, but I have no problem being wrong. (In fact, I’ll make more money if stocks decline sharply, so here’s to hoping I’m wrong!)

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Is GME making a comeback?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

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

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

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

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

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

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

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

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

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

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

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

“Fool me twice, shame on me.”

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What Tuesday’s early tumble did to me

By Jani Ziedins | End of Day Analysis , Jani's Trading Diary

Is this finally the top?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

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

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

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

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

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

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

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

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

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

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Why this rally still has room to run

By Jani Ziedins | Weekly Analysis

Free Weekly-Analysis:

It was a disappointing, holiday-shortened week for the S&P 500 with the indexes closing in the red every single day. That said, all four losses only added up to a measly -0.7% decline and the index remains within 1% of all-time highs.

If this is the best bears can manage, our near-term prospects look pretty good. As I’ve been saying for a while, if this market was grossly overbought and vulnerable, the collapse would have happened by now.

Remember, market crashes are breathtakingly quick and if you hesitate, even for a moment, you get run over. Four down days that don’t even add up to 1% are many things, but breathtaking is not one of them.

Everyone loves to warn of complacent markets, but the important thing cynics fail to mention is just how long complacency lasts before the fall.

By definition, weak markets do not keep setting record highs, and by that measure, this is most definitely not a weak market.

Everything will come crashing down at some point because it always does. But lucky for us, this is not that point.

There is nothing to do here other than keep holding for higher prices and continue raising our trailing stops.

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Do three losses in a row change anything?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

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

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

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

As I wrote yesterday:

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

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

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

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

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

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

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If you cannot beat them, join them

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

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

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

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

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

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

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

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

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Is it time to get defensive with TSLA?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

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

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

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

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

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

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

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

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