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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Wednesday was another lazy summer session for the S&P 500 as it added a barely noticeable 0.12%.
Nearly a month ago things looked far less constructive as the index crashed through 4,200 support. But four short weeks later, we are a stone’s throw from 4,400. Funny how that works.
But just like how last month’s dip was bound to bounce, this months’ rally is going to stall. That’s how this game works. Buy when other people are fearful, sell when they are greedy.
Now to be clear, I’m not calling a top, simply pointing out the risk/reward is no longer skewed in our favor. In fact, following a 5% move over four short weeks, the risk/reward is most definitely skewed against us.
Sometimes it makes sense to buy the uncertainty. Other times it makes sense to sell the confidence. And the most important thing to remember is we only make money when we sell our winners. And often the best time to sell is when we are the most reluctant to let go.
Often the most reliable trading signals are buying when you don’t want to buy and selling when you don’t want to sell. Think about that for a second. How many great trades did you miss because you were too afraid to pull the trigger? And on the other side, how many great trades did you let implode because you didn’t want to lock in some nice profits when you had them?
Maybe stocks continue higher. Maybe they stall at 4,400 for a while. Or maybe they retreat and retrench a little before the next leg higher. But no matter what they do, the odds are most definitely stacked against another 5% rally over the next four weeks.
ZM is showing us what happens when we hang on a little too long. As I wrote a couple of months ago, the bounce off of $300 was an attractive buyable entry. But after the stocks rallied more than 30%, I told readers last week this was a good time to protect those profits. And here we are a handful of days later and the stock has already given back 40% of those nice profits. Easy come easy go.
As the stock market saying goes, “bulls make money, bears make money, and pigs get slaughtered”. Don’t be a pig.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Tuesday proved to be a mixed session for the S&P 500. Early strength tagged yet another intraday record high, this time cresting 4,390. This latest move put the index within whispering distance of the psychologically significant 4,400. Unfortunately, a midday selloff prevented us from closing at those levels and instead, the index gave up a very modest third of a percent.
Two steps forward, one step back, that’s how this game works. But the thing is, a third of a percent retreat doesn’t really count as a step back, especially following a 5% rally in less than a month…
At the very least, we should expect the rate of gains to stall at 4,400 for a while. Probably even the remainder of the summer. And here’s the thing, stalling at 4,400 doesn’t mean flatlining at 4,400. There will be some choppiness in this sideways trade, but there is no reason (yet) to think any near-term weakness will trigger larger declines. Instead, this latest run to 4,400 needs to catch its breath and this will most likely transition into a sideways grind.
Quite simply, we need to dial back our expectations for the remainder of the summer. This rally has been moving in 200 point increments and challenging 4,400 puts us at the top of that next step. It is totally unreasonable to expect this rate of gains to continue non-stop to 4,600.
So what’s a trader to do? There is no reason to abandon a flat market, but it does make sense to start locking in some of these nice profits. If this pops above 4,400 sooner than expected, it is easy enough to buy back in. But as I often remind readers, we don’t make money until we sell our winners. And for the nimble swing traders in the audience, these are definitely worthwhile profits that need some pruning.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 set yet another record closing high, this time cresting 4,380.
We didn’t have any headlines driving the buying and instead, this was little more than a continuation of the market’s half-full mood. Investors continue seeing the sunny side in everything and are sweeping everything else under the rug.
How much longer can this complacency last? Well, the last meaningful dip (10%) was right before the 2020 election and that was more than half a year ago.
While bears will point to this long stretch of uninterrupted prosperity as proof the next fall is imminent. I look at it the other way. If we lasted 180 days without a meaningful pullback, what are the odds the situation changes tomorrow? (FYI, I also don’t mind getting on rickety old airplanes with rickety old pilots because if they lasted this long, they will almost certainly last one more flight. I fear the young and untested, not the battle-proven.)
No doubt this rally will stall like all of the other rallies that came before it. But don’t expect this reversal to happen in the middle of the slow summer months on zero news. Things could get far more interesting this fall as large investors return from summer vacation and start moving things around ahead of year-end. But until that happens, don’t expect much.
Keep holding for higher prices and lift our trailing stops. The worst thing that will happen to this market is stalling near 4,400. And you know what, that means a few down days are ahead of us so resist the urge to overreact to every bump in the road.
If a person fears a routine 2-3% pullback in the indexes, keep stops close and be ready to lock in some nice profits soon. If these minor gyrations don’t bother you, then keep hanging on and wait to see what comes later this fall.
TSLA popped following Elon’s testimony on Monday. He will take the stand again on Tuesday, but so far most investors like what they hear. And to be honest, a worst-case, $2 billion fine is pocket change for one of the richest men in the world. So while this makes for juicy financial press gossip, it really isn’t material to TSLA. (Some people think this will land Elon in jail. LOL)
Far more important than this trial is $600 support. Fail that and it could trigger another wave of defensive selling. But until that happens, last week’s bounce just above support is buyable. That said, this doesn’t get real interesting until it gets above recent resistance near $700, but so far, so good.
Keep holding TSLA for higher prices but always be ready to pull the plug if this falls under $600.
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By Jani Ziedins | Weekly Analysis
Free Weekly Analysis:
The S&P 500 finished the week up 0.4%, setting yet another record closing high. That said, the index took the long way getting there after Thursday morning devolved into the biggest down day in nearly a month.
Two steps forward, one step back. That’s the way this game works; always has, always will. The index racked up seven consecutive record closes leading into the week and obviously, a down day or two were coming. And that’s exactly what the market gave us this week.
More important than a down day or two is how most stock owners reacted to those bouts of weakness. For the most part, investors shrugged and kept holding. Which, coincidentally enough, is the same exact thing they’ve been doing all year.
While bears have been begging and pleading for a breakdown, anyone who’s been paying attention knew this selling didn’t stand much of a chance. No doubt this bull market will die like all of the other bulls that came before it, but this will bounce dozens and dozens of times before that happens.
Do smart traders go all-in on the thing that happens only once every year or two? Or do they stick with the thing that happens 50+ times in between?
Weak markets don’t keep setting record highs, so this most definitely is not a weak market. Keep following this strength higher and see where it takes us. Next up is 4,400. After that, we might be setting up for another sideways grind into the fall season.
After a slow start to 2021, the FAANG stocks are finally getting their mojo back. All of them are at record highs, with the exception of NFLX and even that laggard is doing a solid job bouncing off of $500 support.
We are coming into earnings season and baring anything shocking, we should expect this nice glide higher to continue. These stocks have reclaimed their leadership role and that is good for the entire market.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 added 0.34% Tuesday, bouncing back from Monday’s modest decline. This makes it 10 up days out of the last 12 trading sessions. Not bad.
Headlines remain benign during these slower summer trading sessions. Not much is going on and the market’s half-full mood keeps shrugging off all of the reasons stocks should be lower.
And so far, there is no indication anything is going to change anytime soon. Monday’s 1% midday swoon would have broken a weaker market. Instead, most owners shrugged and kept holding. Say what you want about complacency, but when confident owners refuse to sell, that makes it really hard for any selloff to establish a toehold. And as such, the index finished Wednesday at yet another record close.
After-hours futures are down a quarter of a percent and maybe that means stocks open lower Thursday. But if a person believes a trend is more likely to continue than reverse, any near-term weakness is simply giving us another buying opportunity.
Until selling pushes the index under 4,250 support, I’m holding for higher prices.
As well as the indexes are doing, the meme stocks cannot catch a break. GME fell under $200 support and AMC was rejected by $60 resistance.
I wrote on these pages back in May that GME’s $200 breakout was buyable and the same applied to AMC’s $15 breakout. While I’m no fan of these stocks, I trade the market and when it tells me to buy, I buy. And the same applies when it tells me to sell.
No matter what you think about these stocks long-term, they have been flashing sell signs for a while. When AMC struggled with $60, that was our signal to lock in profits. The same followed GME’s failed flirtation with $300.
Remember, we only make money when we sell our winners. And guess what? If we sell too early, we can always buy back in. It is far easier to do that than it is to wish a stock back up to a level that we regret not selling at.
As for what comes next, there is zero excuse to hold GME under $200 and there is still time to lock in respectable profits in AMC before this one retreats back to support.
As for entry points, GME is buyable only if it reclaims $200 support and AMC is buyable when it breaks above $60 resistance. Until then, these are very clear sells.
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