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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 exploded higher Monday morning following last week’s breakout through the psychologically significant 4k level. But this isn’t a surprise, as I wrote last week:
Most of the things cautious investors worry about are still hanging over us (Covid, rising interest rates, elevated unemployment, sky-high stock valuations, etc), but the stock market is no longer bothered by these things. But this is normal as headlines eventually become priced in.
Nervous owners that fear these headlines sell to confident dip buyers who don’t mind the risks. After enough time passes, we exhaust the supply of fearful sellers and prices resume their climb. That’s exactly what happened here. The environment is not great, but we have definitely avoided the worst-case scenarios and less-bad is all we need to keep the rally going.
From a trading perspective, there is nothing to do other than stick with what has been working. I’m holding for higher prices and lifting my stops, now spread across the 3,900s.
We can argue with the market or we can profit from it. I choose profit every single time.
No doubt something will come along and rain on this parade (because it always does), but until we see a series of lower-highs and lower-lows, there is only one way to trade this.
The FAANG stocks finally turned it on are helping propel the indexes to these record highs. FB is back making record highs while GOOGL was already near all-time highs and keeps adding to them.
AMZN, AAPL, and NFLX are a little further back, but that is actually a good thing for us because that means these stocks have more profit potential during their recovery.
I really like FG and GOOGL, but right now, AMZN, AAPL, and NFLX are even more attractive.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 surged to record highs and closed 20 points above the psychologically significant 4k level. It’s taken a few weeks, but we finally did it.
Wall Street brokers are already handing out the 4k hats. While that sounds like the perfect invitation to make a contrarian bet, only fools trade against something for no other reason than it looks “too high”. Before giving up on this bull market, we need a concrete and compelling reason to stop going along with this strength.
Without a doubt, this 4k breakout could be the beginning of the end, but the very first thing that needs to happen is for prices to stall and retreat. The very most important part of that sentence was “retreat”. Until stocks actually retreat from these levels, there is nothing to do but keep holding for higher prices.
A lot of people got out prematurely at 3,600, 3,700, 3,800, 3,900 and now 4k because stocks are “too high!” The thing these people forgot is “too high” often ends up going even higher.
Never bet against a market that keeps making new highs. Until we start getting a series of lower-highs and lower-lows, this bull market is alive and well and there is only one way to trade this.
The S&P 500 broke through 4k and the FAANG stocks came back to life! It’s hard to say who is leading who, but the most important thing is both are finally working together. As long as the FAANG stocks keep this newfound strength, expect the indexes to continue pushing higher.
Of the group, FB and GOOGL are clearly the best and either at highs or very close to them. That said, the FAANG laggards often catch up and that means we shouldn’t give up on AAPL, NFLX, and AMZN. In fact, there is more upside in betting on these catching up than chasing FB and GOOGL near the highs.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
After spending most of Wednesday at record levels, the S&P 500 pulled back modestly at the end of the day and just missed a record close by a measly 2 points. Close, but no cigar.
While it is never helpful to see a stumble into the close following a push to fresh highs, the market deserves a pass this time. Wednesday was the final day of the first quarter and some institutional investors move things around for housekeeping and reporting purposes. This window dressing isn’t significant and doesn’t mean anything. I won’t give this late fizzle a second thought as long as the selling doesn’t continue Thursday.
At this point, the market is in good shape and passing through 4k seems inevitable, if for no other reason than the market tends to go where everyone is looking.
It’s taken the market nearly two months to go from 3,900 to 4k. That’s a very reasonable amount of time and cooled off some of our previous “overbought” conditions. Sometimes markets rest by pulling back, other times they rest by trading sideways.
This sideways consolidation hasn’t been long enough to support a dramatic rally, but we are on pace for a continued grind higher. As long as we keep getting more up than down, everything is going according to plan.
TSLA has done a really nice job bouncing off of $600 support. As I wrote on Friday:
If anyone was fortunate enough to be reading this blog back in February and locked in some nice profits near $800, this is a good place to be adding some of that money back. Place a stop under $600 and see where this bounce goes.
That said, be wary of any retreat back under $600, especially so quickly after bouncing off of support. If dip buyers don’t show up and this falls under $600 over the next few days or weeks, that shows demand is a problem and lower prices are ahead. And the scary thing is there is a lot of clear air between $600 and $400 support.
But that is simply a contingency. As long as TSLA remains above $600, all lights are green.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
On Tuesday the S&P 500 slipped for the second day in a row following Friday’s record close. That said, these two losses only added up to 0.4% and the index remains within easy reach of the psychologically significant 4k milestone.
The 10-year Treasury yield pushed up to another post-covid high. But as alarmed as equity investors were when this yield rally took off earlier this year, this latest round of increases are largely being met with a yawn. But this isn’t a surprise. We’ve been living under the clouds of higher interest rates for a couple of months and if they were going to kill this bull market, it would have happened by now. Instead, most stock owners remain confident and are holding for higher prices.
A popular stock market truism warns us of complacency. While complacency often proceeds the fall, the thing most people forget to mention is just how long compliance lasts before the fall. Markets can stay complacent for many months, even years. That means anyone trading the early signs of compliancy is getting out long before they should. While these cynics will eventually be right, they will be wrong for a long, long time before that happens.
Weak markets don’t keep making record highs. That means this market is strong, not weak. Until we have compelling evidence to the contrary, continue giving this bull market the benefit of doubt. Hold for higher prices with stops spread around 3,900.
While the charade in GME will eventually come crashing back to earth, there are no limits to what fools and their money can accomplish when they pool their resources. While GME is headed back to $20 over the medium term, the near-term upside looks interesting. As obvious as the inevitable collapse is, we have to take note of just how stubbornly the stock is holding near $200.
One of the most powerful signals in the stock market is when something is not doing what everyone thinks it should be doing. In this case, the obviously overvalued GME should be tumbling back to $20. The fact we are still holding near $200 tells me there is still a lot of demand at this level and the stock wants to take another run higher.
This might be the last gasps of a dying stock, but if this gets above $200, it is buyable for a (very) quick trade. If you get a 20% or 50% pop, take your money and run because those profits will likely be gone hours later.
And once this near-term pop fizzles and retreats back under $200, this becomes a great short entry point.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Monday started with a modest wave of selling as the S&P 500 digested weekend headlines of a major institutional investor blowing up and unfilled margin calls leaving several banks with massive write-downs.
Experienced traders are taking note because similar episodes triggered a cascade of falling dominos sent the indexes into a bear market. But so far, this story seems contained and hasn’t spread beyond a few directly affected stocks.
At least for the moment, the market is treating this as an isolated incident and Monday morning’s dip was shallow and fleeting.
The afternoon rebound reversed all of the early selling and left us a small fraction shy of all-time highs. As much as the cynics rant about complacency, vulnerable markets don’t keep making higher-highs. The thing the critics forget is just how long complacency lasts before the fall.
At this point, we are only a handful of points from the psychologically significant 4k level. It’s taken us a couple of months to go from 3,900 to challenging 4k, but it looks like the breakout is finally coming. After two months of resting and consolidating, the market is ready to go.
I’ve been ragging on ZM for months and unfortunately, the situation isn’t getting better. After a brief bounce above $400 support last month, the stock retreated back to recent lows and is poised to start making fresh lower-lows. This remains a short under $400 and for anyone still holding ZM, it is about to get worse.
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By Jani Ziedins | Weekly Analysis
Free Weekly Analysis:
The slow grind higher continues and the S&P 500 notched another record closing high on Friday.
The index exceeded the old highs by an almost imperceptible 0.42 points (0.01%), but a beat is a beat. Especially given the headline environment we have been enduring. If this bull can keep making higher-highs despite these headwinds, just imagine what will happen when things get less bad!
The critical difference between stalling and resting is what the market “should” be doing. If the news flow is good and the index struggles to rally on positive headlines, that is stalling and something we should definitely be worried about. (Running out of buyers.) On the other hand, if the news is mostly negative and the market refuses to go down, that is definitely a bullish indication and tells us the market wants to go higher. (Tight supply.)
As every cynic can attest to, there are far more reasons for stock prices to tumble than go up. In fact, most pundits are confused by the market’s stubborn resilience. This contrarian behavior confirms there is more energy left in this rally and we shouldn’t give up on it just yet. As obvious as this sounds, something that refuses to go down will eventually go up.
TSLA slumped 5% last week and is on the verge of falling under $600. Violate support and this becomes a great shorting opportunity. On the other hand, bounce off of support and this becomes a great buy. While it sounds like I’m trying to play both sides of the fence, that’s the way these momo stocks work. Either they are racing higher or they are crashing lower.
$600 is our line in the sand. Above support and TSLA is buyable. Under support and it becomes shortable. It doesn’t get any more straightforward than that.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Thursday gave us another rough start for the S&P 500 and the index easily undercut last week’s lows. But rather than trigger a follow-on wave of defensive selling, supply dried up and prices bounced back above 3,900 support before the close.
Sometimes things appear the most hopeless moments before turning around. Between violating 3,900 support in a poor finish Wednesday afternoon, gapping even lower Thursday morning, undercutting last week’s lows, and crashing through the 50dma, everything lined up for a free-fall. And that’s exactly when the market found a bottom and bounced.
We could dissect employment reports, Fed comments, and Congressional testimony, but in the end, the only thing that matters is how the market reacts and it actually took all of these developments in stride. Rather than devolve into a herd of panicked sellers, confident owners shrugged and kept holding.
Thursday’s dip and bounce wasn’t dramatic enough to qualify as real capitulation, but it was good enough to confirm most owners still don’t want to sell. As long as they continue holding for higher prices, dips will remain shallow and quick.
Following a similar theme, TSLA slumped back to $600 support before catching a bid and finishing the day closer to the mid-$600s.
So far so good. TSLA remains ownable above $600 support and we can keep holding. But if prices retreat and fall under $600 support, this turns into an attractive shorting opportunity.
With such a powerful momentum stock like TSLA, there is only hot or cold. Either we are riding a wave higher or we are getting out of the way. A violation of $600 support means there is more pain ahead and we should do our best to avoid getting pulled down in another wave lower.
It is okay for a person to be both bullish on the stock and also defensively locking in profits when prices retreat past our trailing stops.
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What’s a good trade worth to you?
How about avoiding a loss?
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