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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Monday started off well enough for the S&P 500 with the index poking its head into record territory at the open. Unfortunately, that was as good as it got and prices tumbled 1% from those early highs in a relentless, one-way selloff.
There wasn’t any news driving the morning selling and instead, this was simply a counter-reaction following seven consecutive days of new record highs, a streak that hasn’t been matched since the late ’90s.
Two steps forward, one step back, that’s all Monday’s selling was. No matter how good things are, down days are inevitable. And as expected, most owners didn’t flinch and prices bounced in midday trade because confident owners refused to succumb to the selling.
While the index ultimately finished 0.2% in the red, this intraday rebound confirms this is still a very resilient market. That means sticking with what has been working and continue holding for higher prices. The only thing that would give me second thoughts is if the selling crashes through 4,250 support. Until then, lookout above.
It’s been a while since I wrote about ZM, but that’s because this stock has been grinding away out of the spotlight. As I told readers a couple of months ago, this stock was buyable following it’s bounce off of $300 support. And look at that, two months later prices are 30% higher.
But as is always the case, we don’t make money until we sell our winners. 30% is a very worthwhile profit for two months of work and demanding more than that is getting a tad greedy. If a person really likes this stock, they can keep holding but move stops up to protect those profits. And even better, take a little off the table. Remember, we can always buy back in if this grind continues through $400. Until then, expect this stock to take a breather at current levels for a while. (Two steps forward, one step back)
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 touched 4,300 momentarily Tuesday morning before slipping back into the 4,290s in afternoon trade.
There is nothing wrong with a little give-back following a push to a psychologically significant level. While 4,300 isn’t conventional resistance in terms of being an area of prior overhead supply, it can act like resistance simply because people intuitively think in round numbers. And after a nice run like this, it is natural for people to start wondering if this has gone too far?
Initially, the market was attracted to 4,300 because it was where everyone was looking. But once we got there, it turned into a popular spot for like-minded people to start taking profits. And that’s what let the air out of our tires this afternoon. But in reality, this was nothing more than the market moving in waves; two steps forward, one step back. Don’t all yourself to read anything more into it than that.
This remains a half-full market and I don’t see anything suggesting the market’s mood is changing.
(That said, a bigger selloff Wednesday that pushes the index back to 4,250 and we need to reevaluate our outlook. Bounce off of 4,250 and everything is back to normal. Finish at the daily lows and more near-term pain is ahead. But until something fundamentally changes, every dip is a buying opportunity.)
High keeps getting higher and FB is living proof of that.
Things didn’t look so good for the company last fall given all the threats of regulation, breakups, and backlash from the way the company handled the election. But as is often the case, the market knows what the headlines will be long before they are announced. This stock bounced off the lows last winter and it’s been rallying ever since. And the cherry on top is this week a judge threw out the FCC’s antitrust lawsuit.
While a person that waited for these bullish headlines missed a whole lot of upside this year, there is little reason to think this stock has topped here. The trend is higher and we always give the benefit of the doubt to the trend.
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By Jani Ziedins | End of Day Analysis
Free-After Hours Analysis:
The S&P 500 finished Monday at the highest levels in history and the index sits a few points shy of 4,300.
As I’ve been saying for a while, high tends to get even higher and that’s definitely the case with this market.
We will eventually reach a point that is too high (because we always do), but cynics have been calling for a top at 3,800, 3,900, 4k, 4,100, 4,200, and soon to be 4,300. Is there any reason to believe they will be right this time?
That said, this rally could very easily stall at 4,300, but there are not any signs this is going to happen. And until we see evidence in the price action that the trend is changing, we stick with what has been working.
This rally will die like all of the others that came before it, but that cannot happen as long as this bull market keeps making higher highs. Until something changes, keep giving this market the benefit of the doubt.
The FAANG stocks are finally getting their act together after lagging behind all spring. FB and GOOGL have been leading the charge with both making record highs for a while. And AAPL and AMZN are not far behind. NFLX has been the lone laggard, but even that one is showing life following its latest buyable bounce off of $500 support.
Now that the FAANG stocks are trading well again, look for these highfliers to start leading the rest of the market higher.
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By Jani Ziedins | Weekly Analysis
Free Weekly Analysis:
Seven days ago the S&P 500 was in midst of a meltdown. The index shed nearly 2% that week and Friday finished at the weekly lows. And more than that, the index crashed through 4,200 support and undercut the 50dma to put a cherry on top. Could things go into the weekend any worse?
What was this week’s follow-up act? The biggest up week since February. Funny how that works.
One week down, the next week up. That’s been the tale of the tape all year and nothing changed this time. And more than just bounce back, the index finished this Friday at the highest levels in history.
Everyone knows markets cannot go up every single day, yet these same people overreact to every bump in the road. But here’s the thing, weak markets don’t keep setting record highs. Until further notice, this is a strong market and it deserves the benefit of the doubt. Every dip is buyable until the market tells us otherwise. If the selling continued Monday, then we would have taken that more seriously. But stocks popped 1.4% Monday and the rally was fully back on.
I firmly believe in stop losses, but these are not sell-and-forget triggers. As soon as we get out, we start looking for the next entry point. And this time, if the market dumped us out last week, it gave us the go-ahead signal Monday morning and the rally was back on.
As is often the case, high tends to get even higher and this market is not letting anything hold it back. Investors are in a half-full mood and they are not allowing negative headlines to weigh them down.
We are smack dab in the middle of the summer trading doldrums. But as I have been writing for a while, boring is almost always good for stocks. Something more interesting will come along, probably later this fall, but until then, high will most likely keep getting higher a few points at a time and the psychologically significant 4,300 level is next on the list.
While I wish I could come up with more thoughtful and insightful analysis, the truth is this is a simple market and it doesn’t require complex mental gymnastics to figure out what comes next. It won’t always be this easy, but until something changes, stay the course.
Without a doubt, complacency and bullishness are off the charts, but I trade the market and right now it keeps telling me it wants to go higher. So that’s what I’m sticking with.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 popped to record levels at the open and it held those gains through the close.
Weekly unemployment claims are stabilizing at reasonable levels and investors are cheering moderation. Too high signals economic weakness and too low suggests this wave of inflation is only just getting started. Holding between these two extremes is the “just right” investors were looking for
The market’s half-full sentiment keeps getting even fuller. That’s been the theme of the year and it doesn’t look like it will change anytime soon. Owners are confidently holding for higher prices and are shrugging off all of the reasons for stocks to go lower. When owners don’t care about the negatives, supply remains tight and prices are stubbornly buoyant.
No doubt something will come along and knock us down, but until that happens, all lights are green. If this market was as fragile and vulnerable as the bears claim, it would have collapsed by now. Things will get more interesting this fall when institutional investors return from summer vacation and start positioning for year-end. But that is still months away and until then, we should expect more of the same.
Cynics claim this market is fixed/rigged/etc, but if they know that’s the case, shouldn’t they be riding along and making money instead of complaining about it? There is only one way to trade this market and that is sticking with what has been working.
The index is trading well but someone forgot to tell AMZN. But one off day doesn’t mean we should abandon a stock that has been working well for months. On the positive side, NFLX seems to be finding its footing. While this could have slipped under recent lows, that didn’t happen and it looks like dip buyers are finally warming up to these discounts. This remains a buy above $500.
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