Apr 16

When to lock in profits in the index and what the FAANG stocks are telling us

By Jani Ziedins | End of Day Analysis

Free End of Week Analysis:

After spending most of February and March consolidation between 3,900 and 4k, the S&P 500 finally broke out and launched itself nearly 5% in just two weeks.

Coil…spring…coil again…spring again…

So far everything is going according to plan. That said, 5% in two weeks is steep even for the most bullish of markets. That means at the very least, we should expect the rate of gains to slow down over the near term.

Expecting a slowdown doesn’t mean I’m bearish, just that I’m realistic and have been around the block a few times. Two steps forward, one step back.

That said, we don’t need to bail out of this market until the next dip actually starts. Keep holding for higher prices as long as the index remains above our stops in the upper 4k’s/lower 4,100s. Just because another 5% move is unlikely doesn’t mean it is impossible.

Savvy traders let the market tell us when it is time to lock in profits and so far this one isn’t signaling us yet. The biggest warning sign of faltering demand will be a couple of fizzles into the close. That is a good sign to lock in some profits proactively and we don’t need to wait for the market to hit our stops.

If there is one warning sign of a looming slowdown, it is the lethargic behavior of the FAANG stocks this week. These best-of-the-best stocks helped launch the 4k breakout, but these same stocks lagged behind badly this week.

If they get their act together next week and start outperforming again, all is forgiven and forgotten. But if their underperformance continues next week, expect this to weigh on the entire market and the near-term consolidation/pullback is upon us.

As we saw in February and March, the index cannot rally without the biggest stocks participating.

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Apr 15

How to protect profits in the index and the best way to trade $TSLA’s reversal

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis:

The S&P 500 popped 1.1% Thursday and is up 8% in three weeks. (Trade that with a leveraged ETF and the profits are spicy!)

Three weeks ago investors were cowering from spiking Treasury yields. Now I cannot even remember the last time I saw an article mention Treasury yields. But that’s the way this always goes; buy the fear and sell the relief.

As good as this trade has been, only a greedy fool expects the index to surge another 8% by early May. I’m not suggesting people rush out and sell everything because “stocks are too high!”, but I am saying we need to be far more careful following a nice, one-direction run like this. (Everyone knows stocks move in waves.)

Keep holding for higher prices but move up our trailing stops and consider locking in some profits proactively if the index stumbles into the close on Friday or early next week.

Wednesday was an awful day for TSLA and things were only marginally better Thursday. The stock popped early Wednesday and challenged $800 resistance, but rather than chase prices higher, investors hit the sell button and the stock ultimately finished down 4%.

While I’m not going to give up on this stock because of one bad day, but this intraday fizzle was a huge warning flag. The important thing is the stock stabilized Thursday and the selling didn’t continue.

Everything is fine as long as TSLA remains above $700, but lock-in profits if this retreats under $700 because the selling won’t stop until it hits $600 support. (The most aggressive trader could short a violation of $700 with a stop just above this level.)

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Apr 14

What to expect from the indexes over the next few days, plus when to buy $GME

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 “tumbled” on Wednesday. Or at least that’s the way a 0.4% loss feels after such a pleasant climb following the 4k breakout.

This rally to the mid-4,100s has been a little too easy and as such, some near-term selling is inevitable. Nine up days over the last few weeks will most likely be evened out with several days of selling. (Everyone knows markets move in waves.)

That said, there is no reason to rush out and abandon this market simply because we’ve gone up too many days in a row. As ridiculous as this feels, nothing prevents this from getting even more ridiculous before the inevitable pullback. (Just ask all the people that sold at 3,800, 3,900, and 4,000.)

As long as this remains above our trailing stops in the mid-4k’s, keep holding for higher prices. While we might experience further near-term weakness, there is no reason to assume anything fundamentally changed and this bull market is still very much alive and well.

GME bounced back pretty hard following a long string of down-days. But until we get above $200, this is nothing more than another lower-high on our way back to $100. GME is definitely a buy above $200, but until we get there, this remains a strong short candidate.

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Apr 13

When to get worried about the bull market and what to do with bitcoin at $60k

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Tuesday was another record close for the S&P 500, this time cresting 4,140 for the first time ever.

These gains mean we rallyed more than 400 points since March’s Treasury yield pullback. That’s 11% over a handful of weeks if you play the normal game and a whole lot more if you take advantage of levered ETFs (like I do).

As boring as this market seems, there have been plenty of opportunities to make good money riding this gentle glide higher.

The looming complication is sentiment typically flips after becoming too obvious. A few weeks ago, it was obvious spiking interest rates were going to kill this bull market. And now it is obvious fundamentals don’t matters and prices will continue higher forever.

As contrarian traders, we need to be ready to go against the crowd. That does NOT mean buying a falling market or selling a rising one. That is arguing with the market and no one every wins an argument wit the market. But now that prices have gone too far in one direction, we need to have A PLAN to deal with the inevitable snapback WHEN it happens (and not a moment sooner).

The easiest and most most braindead way of protecting our backside is following this rally higher with a trailing stop. The most undeniable aspect of any pullback is declining stock prices. If prices fall under our stops, we get out. Easy as that.

There are other signs the rally is running out of gas, but none of those apply to an index that keeps making fresh highs. We can dig into those warning signs when prices retreat from the highs, but until then, keep holding for higher prices and continue lifting our trailing stops.

This rally will end at some point, but this is not that point.

Bitcoin broke out above the old $60k highs and added another 5%. So far so good. Keep holding for higher prices with stops just under $60k. If this breakout fizzles and retreats back into the consolidation, demand isn’t ready yet. But as long as this cryptocurrency remain above $60k, keep holding for higher prices.

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Apr 12

An easy index trade and bad news for $GME bulls

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 spent most of the day ever so slightly in the red, but that 15-point dip couldn’t stick and this stubbornly bullish index finished near breakeven.

No doubt this rally cannot remain this easy and brainless for much longer, but as long as it continues trading well, there is no valid reason to argue with what is working.

Trading is hard enough and we don’t need to make it harder by arguing with the market. Keep following the index higher and lift our trailing stops. This will run out of momentum at some point, but it will go a lot higher than most people think before it does.

GME‘s latest flirtation with $200 is ending in disappointment. I was impressed with how well the stock was holding near $200 and that often indicates the stock wants to break through resistance. But there always comes a point where resting turns into stalling. As I wrote last week:

GME is a buy above $200 but it is struggling to close the deal and it cannot get above this key resistance level. Fail to deliver on this obvious breakout and this starts looking more like stalling than resting and we need to be extremely careful.

GME has clearly crossed the tipping point into stalling and things are not looking good for the stock. This is why it is so important to wait for the breakout before committing. One, it requires the stock to demonstrate its strength before we put our money at risk. And two, it creates a clear stop loss level to protect our backside.

If GME cannot arrest this fall in a real big hurry, expect the selling to accelerate and for prices to tumble under $100 in the blink of an eye.

This remains a strong short until it gets above $200.

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Apr 09

Why it doesn’t matter if this bull market is built on a house of cards

By Jani Ziedins | Weekly Analysis

Free Weekly Analysis: 

The S&P 500 added 2.7% last week with all of those gains pushing the index even deeper into record territory.

As I’ve been saying for a while, this is a strong market and by nature, strong markets go up more than they go down. And in this case, a lot more up than down.

A little over a year ago the index bottomed at 2,190 as fear of a global lock-down climaxed. But as is usually the case, reality turned out less bad than feared. Stock prices recovered from those oversold levels and the index now finds itself 90% above those Covid lows. And not only did we bounce back, but the index is actually 22% above those pre-Covid highs!

As crazy as this sounds, Covid has been very bullish for stocks. Chalk it up to government stimulus and ridiculously low-interest rates. But as far as the economy goes, the Covid lockdowns were little more than a bump in the road, and in fact, many consumers are sitting on such large piles of money they are bidding up the prices of houses and draining auto dealer inventories. Most businesses are struggling to keep up with demand and their biggest problem is keeping inventory in stock!

Is this economy build on a house of cards? Will inflation come along and knock everything down? Maybe. But here’s the thing, as independent investors, we don’t need to predict the future. The greatest strength we have is the nimbleness of our size. We can jump in and out of the market with a few mouse clicks. What happens next week, next quarter, or even next year isn’t material to us. As soon as this bull market runs out of gas, we get out.

There will be the inevitable false alarms and we will get shaken out by a few whipsaws that undercut our stops. But as long as we are willing to get back in, no harm no foul.

I don’t need to predict what the market will do next because I am nimble enough to react to it in real-time. At this point, I’m holding for higher prices and lifting my stops to the lower 4k’s. If prices dip, I get out. If they keep going up, I continue hanging on. It really is that easy.

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Apr 08

A simple trading plan for the indexes

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Thursday within three points of 4,100. Not bad for an “overbought” market.

It took a couple of months to rally from 3,900 to 4k, but it only took a few days to make the next step to 4,100. But that’s the way this goes; lunge…rest…lunge again…rest again…

I don’t expect this latest breakout to go a whole lot further before falling into the next consolidation. We will hit 4,100 imminently, but it could be a while before we get to 4,200. As the saying goes, two steps forward, one step back.

That said, as long as stocks keep going up, there is only one way to trade this. Keep holding for higher prices and lifting our trailing stops to the lower 4k’s.

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