Menu
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 slipped a modest 0.3% on Tuesday and it finds itself down another 0.5% in after-hours trade. Not what I was hoping for and it seems like this weakness ants to stick around a little longer.
As I wrote Monday evening, retaking 3,425 Tuesday would have been a great entry point. Remember, we don’t buy dips, we buy bounces. Reclaiming 3,425 support would have done two things. First, it would have demonstrated resilience and proved dip-buyers were back in control. Second, it would have given us a clear entry-point with a sensible nearby stop-loss. Buy the bounce with a nearby stop and the risk/reward is skewed heavily in our favor. If the bounce returns to the upper end of the trading range, we make a few bucks. If it fizzles and retreats, we lose a few pennies. I really like that risk/reward.
Alas, it wasn’t to be. Stocks never reclaimed 3,425 and I was left watching this listless grind from the sidelines. While I didn’t get the bullish trade I was hoping for, by having a clearly defined prerequisite for entering the market, I never bought the dip and I avoided this subsequent weakness.
Going forward, if prices fall even further, no big deal. In fact, additional weakness works out even better for me because the lower prices fall now, the more profit opportunity there is buying the next bounce.
Adjusting this trade for the more aggressive trader on Wednesday: If prices undercut Monday’s lows (3,365ish) and continue falling, short that weakness with a stop just above this level. If prices gap under Monday’s lows at the open but quickly bounce back above, buy that bounce with a stop just under this key level.
As volatile and emotional as this market is getting, expect the next directional move to be swift and decisive. That means jumping in early and hanging regardless of which direction it is headed.
If you find these posts useful, please return the favor by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 crashed Monday as investor sentiment soured following record-high Coronavirus infection rates in Europe and the U.S. and the next round of Covid stimulus negotiations are postponed until after the election. At least that’s what the financial media told us.
While both of these headlines are extremely concerning, do they qualify as new and unexpected? Nancy Pelosi’s stimulus deadline came and went nearly a week ago and European infection rates have been spiking since September and the U.S. rates have been trending higher for nearly as long. If a person didn’t see these things coming from a mile away, clearly they were not paying attention. Yet the financial press spins these obvious events as if they caught everyone by surprise. I don’t know about you, but neither of these headlines surprised me. While I might be more cynical than most, I doubt these predictable headlines surprised even optimists among us.
If stocks didn’t tumble today because of a surge in infection rates or the postponement of stimulus negotiations, why did they crash? Simple, stocks move in waves. Always have and always will. Every bit of up is followed by a bit of down. Everyone knows this, yet it is amazing how many people are caught off guard when the next wave comes.
Large institutions already positioned themselves ahead of the election. Bullish or bearish, big money placed their bets weeks ago and that means supply and demand is modest and prices are mostly drifting sideways into the election.
The thing to remember about trading ranges is prices typically rally to the upper bound before stalling falling to the lower end. The S&P 500 challenged 3,500 in early October where it peaked and now it is testing 3,425 support.
If that’s all that’s going on, should people be running around in a panic? No, of course not. But if people didn’t panic and sell, prices wouldn’t fall. Investing 101: Every dip feels real. If it didn’t, no one would sell and prices wouldn’t fall.
As bad as Monday’s selloff felt midday, prices bounced and finished well above the early lows. As is usually the case, how we close is far more important than how we started. The early wave of selling capitulated and prices bounced back near 3,425 support by the end of the day. If stocks reclaim support Tuesday, that’s a buyable bounce with a stop just under this level. Start small, get in early, and keep a nearby stop. If the market trades well tomorrow afternoon, add more. If it doesn’t, no big deal, pull the plug and try again next time.
Previously, I was expecting some weakness after the election. But maybe that weakness came a little early. Until further notice, I will treat this test of support as a buying opportunity, not a reason to abandon ship. If prices tumble under 3,400 Tuesday, all bets are off and I will reevaluate. Until then, this is a great entry point with a well-defined stop.
If you find these posts useful, please return the favor by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
By Jani Ziedins | Weekly Analysis
Free Weekly Analysis:
The S&P 500 lost half a percent this week as it consolidates gains near recent highs. While not a great week, such a minor pullback near the highs and in this dubious headline environment is actually a constructive sign. Overbought markets tumble from unsustainable levels quickly and so far that hasn’t happened here, suggesting stocks are neither overbought nor unsustainable.
As much as investors are looking forward to another round of Covid stimulus, it appears that won’t get done before the election. But as I wrote previously, the market isn’t overly concerned about a week here or there as long as it looks like something will get done eventually. If the timing was critical to the market, we would have seen far more dramatic swings as these negotiations dragged on. Instead, most owners shrugged and kept holding their favorite stocks.
With little more than a week to go before the election, we shouldn’t expect a lot from the market between now and then. If the polls, Supreme Court, or even the outcome of the election mattered, we would have seen far more volatility show up in the price action. Instead, most investors seem pretty content with what they see and are comfortable holding for higher prices.
In my opinion, the biggest near-term risk is a wave of sour-grapes selling by supporters of the losing candidate. This could trigger a near-term dip in the hours and days after the election, but this is typically a fleeting phenomenon. Once those sore-losers finish giving away their stocks at a discount, supply will dry up and prices will bounce.
On the other hand, if the election goes off without a hitch and we know the winner Wednesday morning, stocks could actually rally in relief that we avoided a constitutional crisis.
Dip or no dip in the days after the election, expect stocks to trade well for the remainder of the year.
If you find these posts useful, please return the favor by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The final presidential debate came and went and stock futures barely noticed. But that isn’t a surprise. As ridiculous as the first debate was, it didn’t move the market in a meaningful way and this slightly less crazy version was even less likely to matter.
The debates are done. As many as 1/3 of voters have already cast in their ballots and if you believe the polls, only 4% of the electorate remain undecided. (If a person hasn’t made up their mind by now, clearly they are not paying attention!) This election is going to turn out how it is going to turn out and tonight’s debate didn’t change anything.
At this point, Trump needs the polls to be way off if he’s going to win reelection. He pulled off the upset before and he can do it again. I just think it is less likely this time because pollsters recalibrated their formulas after 2016’s miss and are most likely are doing a better job counting Trump supporters, both the outspoken and the shy.
While the stock market loves Republicans’ tax cuts and reduced regulations, chances are good that if elected, Democrats will unleash a stimulus bonanza like we’ve never seen before. Whether all that debt that is good for the economy long-term can (and should) be debated, the stock market will love all the free money and will likely rally over the near-term.
If Trump wins, stocks go up. If Biden wins, stocks go up too. Sounds plausible.
So what’s really going to happen? Stocks will most likely tumble Wednesday morning as supporters of the losing side dump stocks in a giant wave of sour-grapes selling. Whether that lasts a few hours, days or weeks has yet to be decided, but no matter what happens, expect stocks to bounce back and any near-term weakness after the election will be another buying opportunity.
If you find these posts useful, please return the favor by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
It’s been a while since I wrote about bitcoin and it has largely been flying under the radar this summer. Rather than act as a safe haven during the Covid crash, it tumbled alongside everything else. Since then, most pundits gave up on it and it isn’t attracting much coverage in the financial press. Maybe today’s run-up to $13k will change that.
As I’ve been telling my premium subscribers this fall, $10k has been the key level for this cryptocurrency. I’m not a big fan of virtual currencies by any stretch of the imagination, but as long as this held above $10k, it was doing everything it needed to do to earn our respect. It took a few months, but it finally delivered on that promise, surging nearly 30% in a month, most of that happening over the last few days. Not bad.
What’s behind this strength? There are a lot of opinions being thrown around between Paypal integration and a mountain of U.S. stimulus coming our way, but if I had to guess, a lot of nervous Republicans and Democrats are hedging their portfolios in case “the other guy” wins the election.
It doesn’t matter who you talk to, but it seems everyone is convinced the apocalypse is coming if their guy loses. While I have opinions about both candidates, I’m pragmatic enough to know the presidency isn’t nearly as important as most people believe. I’ve traded under both Democrats and Republicans alike and markets go up and down regardless of who sits in the oval office and this election cycle won’t be any different.
By the time December and January roll around, most of the reflexive sour-grapes selling will have passed and the market’s attention will long have since shifted to something else. The same goes for Bitcoin. When the world doesn’t collapse after the election, BTC will lose its appeal and will most likely retreat back to $10k support.
There is nothing wrong with riding this latest wave higher but be sensible and follow this rally with a trailing stop. Remember, we don’t make money until we take profits in our best trades.
If you find these posts useful, please return the favor by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Tuesday turned into a decent day for the S&P 500. While the index only gained a modest 0.5%, more important is Monday’s selling didn’t continue. At least for the moment, the market seems to be finding its footing near 3,425 support.
The big talking point continues to be the next round of Covid stimulus. Nancy Pelosi put a Tuesday deadline in order to pass something before the election. While that now seems unlikely, a few days here or there doesn’t matter that much to the market. More important is a deal gets done and so far all things are pointing in that direction, even if it turns out a little delayed.
That said, I don’t think the market is placing a lot of emphasis on these stimulus negotiations anyway. If it was, we would see far larger swings following these deal/no-deal headlines. While a 1% pop or drop feels like a big deal in the moment, this is more meaningless noise than the catalyst for the next big directional breakout or breakdown.
The market is expecting something around $2T in stimulus. If it doesn’t happen today, then it will come shortly after the election. If it gets delayed into next year, that is most likely because Democrats won the election and Republicans are dragging their feet. But even a multi-month delay isn’t that bad for stocks because a Democrat-led stimulus will almost certainly be larger than anything allowed by Republicans today. The stimulus could be late, but the size will more than make up for it.
No matter what happens, there seems to be more upside than downside as everything turns out less bad than feared. The election will go off without a hitch. Our politicians lack the will to lock the country down again. And more stimulus is coming. All of those things are near-term bullish for stocks.
That said, anything could happen over the near-term and that includes a pullback under 3,425 support. But Monday’s dip to could easily be “close enough” to check that box and the market never looks back. If the index trades well Wednesday, all is forgotten and forgiven. If we get another dip under Monday’s lows, prices will most likely undercut 3,400, even if just momentarily. As soon as the index retakes 3,400, that is our signal to jump back. As always, start small, get in early, keep a nearby stop, and only add to something that is working.
If you find these posts useful, please return the favor by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Monday started off well enough after the S&P 500 rallied nearly 20 points shortly after the open. Unfortunately, that was as good as it got. By the end of the session, prices had retreated 75-points from those early highs in the biggest single-day decline in nearly a month.
As ugly as Monday looked, it shouldn’t surprise anyone. Stocks were approaching the old highs and some near-term resistance was inevitable. Cognitively everyone knows markets move in waves, yet people are still surprised every time stocks take a near-term step back.
Hopefully, everyone who bought September’s bounce was following this rebound with a trailing stop and were able to lock-in some really nice profits over the last few days. If a person bought September’s rebound using a 3x ETF, they locked-in a pretty easy 20% gain over the last few weeks. Not bad.
The key to buying dips is starting small, getting in early, keeping a nearby stop, and only adding to what is working. Even if we got shaken out in September’s first couple of failed bounces, our losses were small and easily offset by riding this 300-point wave higher.
As always, the key is being willing to act when everyone else is afraid of making a mistake. Fortune favors the bold.
As for what comes next, we could see some near-term weakness, especially if our politicians fail to agree on a Covid stimulus bill this week. But if we’re in cash, the lower we go now, the better. It means we make even more money buying the next bounce. That said, unfortunately, I’m not expecting prices to fall a lot further. The market will most likely remain rangebound leading up to the election and the next big trade won’t happen until November.
If you find these posts useful, please return the favor by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
You must be logged in to post a comment.