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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Wednesday was another quiet session for the S&P 500 following last week’s 4k breakout.
While most traders are addicted to drama, boring is vastly underrated. Emotional markets produce big moves, unfortunately, most of the time the big action occurs in the wrong direction. On the other hand, boring markets make far smaller moves, but most of them line up in the positive direction. And lucky for bulls, we are in the middle of a very boring market.
Headlines remain benign and stocks continue rallying on “less bad than feared”. Until something changes, stick with what has been working. Hold for higher prices and keep lifting our trailing stops.
The index finished with a small gain but someone forgot to tell TSLA. The electric car maker lost 3% in an otherwise decent day for leading growth stocks.
While we don’t want to overreact to a single day of underperformance, we need to see TSLA lead this market higher, not lag behind it.
Last week’s nice bounce off of $600 support was buyable, but if this underperformance continues, we need to pull the plug and lock-in profits while we still have them. (And if this retreats under $600, that becomes an attractive short entry.)
I’m not giving up on this stock just yet, but I have it on a short leash.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished Tuesday mostly flat (-0.1%) after spending all day bouncing between small gains and losses. But flat after adding nearly 120-points over the previous three sessions is actually quite constructive.
Everyone knows stocks cannot go up every day, so pinning our hopes on a fourth, fifth, or sixth strong day is unreasonable. But holding all of last week’s 4k breakout and most of yesterday’s strong follow-on gains tells us investors are not rejecting this latest push to all-time highs. Confident owners continue holding for higher prices and few are interested in taking profits at these record-high prices.
No matter what the cynics claim about complacency, as long as confident owners keep holding for higher prices, supply remains tight and it is easy for stocks to keep rallying. As the saying goes, what is high tends to get even higher.
This bull market will fall like all of the others that came before it, but this is not that time. Stick with what has been working and that is holding for higher prices and moving up our trailing stops.
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.
This is a perfect example of why we must wait for confirmation before jumping in. Sometimes close isn’t good enough and this is one of those instances where it is safer to be a little late than a lot early.
Wait for the $200 breakout and we can buy the bounce for a quick trade, but only after this gets above $200.
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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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