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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
As expected, the S&P 500 finally pushed up to and then broke through 3,200 resistance. Today’s gains mark the seventh positive finish out of the last eight trading sessions. While the crowd is busy congratulating themselves for holding through this easy run, those of us that have been doing this a while are starting to get nervous.
Everyone knows the market move in waves, unfortunately, most people forget this simple idea when we are experiencing one. It doesn’t matter if it is on the way up or the way down, people naturally take the recent past and extrapolate that trend from now to forever. After the year we’ve had, why would anyone worry about stocks? Making money in this market is so easy! Or so the popular consensus goes.
Now don’t get me wrong. I am not a bear or anything even close. The market is acting well and I will continue trading with the bullish trend until given a compelling reason to change my outlook. But I also know that if we are in this to make money, the only way we do that is by selling our favorite winners.
It’s been a nice run, but that also tells us it is time to start locking in some profits. A person can do that by either selling proactively into this strength or by following the market higher with a trailing stop. Both strategies work well and it is largely up to personal preference. Pick one and stick to it. Or better yet, do a little of both.
But the other thing to remember is as soon as we get out, we need to start looking for that next trade. Maybe this rally stalls at current levels and drifts sideways into next year. If that’s the case, we stay out and wait for a trade in January. Maybe stocks pause for a few days before continuing higher. Just because we got out doesn’t mean we cannot get back in when conditions warrant it. And maybe the bubble bursts in January and that turns out to be a great time to short the market. No matter what happens, by taking profits now, we will have the cash ready to jump on the next opportunity.
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Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
TSLA has been rangebound, stuck between $200 and $400 since 2017. But this week the stock staged a breakout and is challenging the upper end of the trading range for the first time in a year. Model 3 sales are robust and the company is venturing into pickups, far and away the largest vehicle category in the United State. Of course the stock pushed to the upper end of the trading range, duh! But for those of us that are not drunk on the Koolaid, the real question is whether recent gains are sustainable, or if the stock will be rejected by $400 for the umpteenth time.
No doubt both bulls and bears have compelling arguments supporting their case. But as traders, do we really need to choose sides? Not if we are nimble enough. The upper and lower end of trading ranges give us clear lines in the sand, allowing us to more clearly define our risk. Above this line we are bulls, underneath it, we are bears. It doesn’t get any simpler than that. We don’t care who wins this battle as long as there is a clear victor.
Prior highs near $390 are our trigger point. Above this level we are buyers. Below it, we are sellers. While this seems easy enough, nothing in the market is ever easy and that includes trading breakouts. Most likely, prices will flirt with the prior highs for a while, breaking above and below this level several times before the stock shows its true intention. But as nimble traders, this isn’t a problem for us. We can dart all-in and all-out with a single click. While this will inevitably lead to some whipsaws, that is a small price to pay for both downside protection and profit potential. The big guys only wish they could move as quickly as we do.
Smarter than jumping all-in and all-out, start with a smaller stake and only add more when the trade starts working. That way any losses from the inevitable whipsaws are minor and we will still be in a great position to jump aboard when the true move finally reveals itself.
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Tags: $TSLA S&P 500 $SPY $SPX
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
This is the time of the year when pundits stand on their soapboxes and tell the world what will happen next year. That said, I will be the first to admit I don’t have a crystal ball and won’t even pretend to guess what economic calamities will or won’t happen next year. But even with that limitation, there are still reliable clues we can use to estimate what 2020 will be like.
2019 was the year of a generous and gentle rally. The market climbed nearly 30% and most pullbacks were benign and prices recovered quickly. This strength was definitely aided by a snapback from 2018’s grossly oversold 4th quarter, but regardless of the source, this was the market’s second strongest annual performance since the dot-com bubble. Unfortunately for us, 2020 will look nothing like 2019. The market almost never repeats a performance and next year won’t be any different. If we cross strong rally off the list of possibilities, that leaves us with modest rally, modest dip, and stock market crash.
While stock market crashes are scary and forever seared into the memory of anyone who lives through one, they are exceedingly rare. Most active traders will only see one or two in their careers. Will next year be one of those years? Probably not. Especially since the market is not grossly overbought or overleveraged like it was during the dot-com and housing bubbles. Stocks are definitely not cheap, but they are not “bubblelicious” either.
Crossing both extremes off the list leaves us with a little up or a little down. At this point, I could see either happening. The labor market is stretched and labor shortages will keep a lid on economic growth going forward. If a business cannot find new staff, it cannot expand no matter how strong demand is. On the other side, modest stock market gains could easily be wiped out if an unpopular Republican president is replaced by a Democrat. Fear of looming regulations and taxes will send stocks retreating in the final months of 2020. And so, that is my prediction, fairly modest gains between 5% and 10% if Trump wins. If he loses, expect a flat year.
But where we end is only one piece of the puzzle. How we get there is even more important to active traders. Everyone knows stocks cannot sit still and like a sugared-up 5-year-old, they always have to be moving. Sometimes they move up for extended periods like 2019. Other times they decline relentlessly like 2008. But most of the time, they move up and down for no other reason than they cannot sit still. 2020 will be a year of moving just because. That means lots of moderate dips and bounces along the way. While it won’t show up in a long-term portfolio, 2020 will be a great year for the opportunistic swing-trader.
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Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM
By Jani Ziedins | End of Day Analysis
Free After-Hours Update:
I contemplated writing about Bitcoin last week and given this latest dive, I really should have done it sooner. But hey, better late than never.
Bitcoin was hovering just above $7k support for a few weeks after retreating from this fall’s impressive $10k surge. Bulls have been trying to break the brutal bear market that started back in early 2018 and this latest run to $10k was the noblest attempt thus far. Unfortunately for the Bulls, the wider public failed to embrace the rebound and prices retreated from a lack of demand.
In 2018 Bitcoin went from the thing everyone wanted to the butt of every joke. Many late-to-the-party buyers were burned and they were not about to lose their hard-earned money a second time. And not only was the wider public not interested, but most of the Bitcoin bulls bought everything they could afford on the way down and they didn’t have any money left to add either. Mix those two factors together and you had the recipe for a failed rebound.
I’ve been warning Premium Analysis subscribers to be careful of Bitcoin’s latest rebound and while it seems a little late now that prices are down 35%, that warning is just as applicable. Buyers are still missing and if they didn’t save us at $7k, there is little reason to think anyone will come to our rescue at $6k.
If there is one saving grace, it is that Bitcoin bulls are a stubborn bunch. Anyone who hasn’t sold yet is a “Hodler” and plans on taking their coins to their grave. That undying confidence keeps supply tight every time prices dip under key support levels. Unfortunately, tight supply is only half of the equation and the best it can do is slow the descent. At this point, I see no reason to own Bitcoin because the bear market is alive and well. Expect prices to fall even further over the near and medium-term.
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Tags: Bitcoin $BTC.X
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
This weekend Bloomberg published an article titled “The Bull Market Almost No One Saw Coming“. While I don’t want to delve into the content of the article, the title triggered me a little bit. I saw this bull market coming from a mile away and you should have seen it too.
I’m not psychic or anything of the sort, but to me, this decade long bull market was fairly obvious to anyone who spent time looking at long-term historical charts. Over the last 100 years, there have been multiple “Lost Decades”. These were extremely discouraging periods triggered stock market crashes and the indexes spent the better part of 10 years trying to get back to the old highs. The most recent “Lost Decade” being 2000 to 2013.
While everyone was giving up hope 10 years ago after the Financial crisis, I saw tons of opportunituy. Sure, stocks obviously got too far ahead of themselves during the dot-com bubble and again during the housing bubble. But after a decade of trading sideways, a lot was happening in the real world that wasn’t being reflected in stock prices. In real terms, stocks were actually getting cheaper as the economy grew and equities failed to keep up.
Looking back in history, similar events transpired in the 1910s, 1930s, 1940s, and 1970s. Huge, brutal bear markets devastated stocks and turned an entire generation into cynics. But just when the masses had given up all hope, the market stunned us with the 1920s, 1950/60s, and the 1990s. Four times the market lost a decade and four times the market came roaring back. Was the 2000’s “Lost Decade” going to be any different? No, of course not.
Some of the best investment opportunities in the history of the stock market came in the 10 years following a “Lost Decade”. This time was no different. The only people who didn’t see this bull market coming were the ones who don’t know their history.
As for what comes next, is this bull market tired? Is a crash long overdue? Not if you look at history. Stocks rallied for nearly 20 years between the early 1980s and the late 1990s. By that measure, we could easily see another decade of strong gains before the next “Big One”. Of course, the worst day in stock market history happened during that 20-year bull market in 1987, so we cannot be complacent. But the prognosis for the next 10 years is still good even if we run into a few 20% corrections along the way.
(I’ve written well over 2,000 articles over the last decade, but it would be interesting to sort through some of the old ones from 10 years ago now that everyone knows how it turned out. Sign up for FREE Email Alerts if you want to read those posts when I write them.)
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Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 is racing to record levels, yet AMZN is stuck in reverse and down 13% from July’s highs. What gives?
I’m not a fundamental investor and will leave the financial report crunching to someone else, but this dramatic price divergence tells us something is definitely not right with this stock and it lost its darling status.
If there was one thing that could have saved AMZN, it would have been a blowout holiday shopping season. But rather than cheer Black Friday’s sales numbers, investors sent the stock down 3% since Black Friday. That pretty much dashed any hope of this stock rebounding before the end of the year.
The biggest challenge facing AMZN is it is struggling to find its footing just above $1,700 support. This is a key technical level stretching back a couple of years, but more importantly, it provided critical support during the June and October dips. Unfortunately for the stock, double-bottoms are a thing, triple-bottoms, not so much. And right now the stock is threatening to challenge $1,700 support for the third time in six months.
The very fact we returned to this level for the third time is a huge red flag and should make investors nervous. But more than that is these feeble rebound attempts since the October bounce. There just isn’t any life left in this stock. If people were going to buy this rebound, they would have done it already. Slipping back to these levels again tells me the worst is still ahead of us.
But not to give up all hope, a sharp crash under $1700 could actually be a good thing for the stock. That could be the capitulation the stock needs to recover its mojo. While I wouldn’t touch AMZN right now, if it slices through $1700 support in a fantastically ugly way, but then bounces back days or weeks later, that would be a compelling signal the stock is finally buyable again.
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Tags: S&P 500 Nasdaq $SPY $AMZN
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The trade war is over and the S&P 500 surged nearly one whole percent!
Well, not exactly. The trade war is nowhere near over but Trump tweeted, “Getting VERY close to a BIG DEAL with China.” That kicked off this morning’s explosive rally. Well, calling it explosive might be overstating the situation a tad, but it was a good day and the index closed at all-time highs.
Anyone hoping for more is sadly disappointed by this somewhat muted reaction. But this shouldn’t surprise those of us that have been paying attention. Yesterday I wrote that the stock market was growing tired of trade war headlines and deal or no deal, we shouldn’t expect a move greater than 1% in either direction. Today we got the strongest indication yet of a deal and the index surged a measly 0.86%.
More important than deal or no deal is how well the market has been performing this quarter. Despite the relentless barrage of negative headlines, stocks continue pushing into record highs. While some people claim the market is complacent and that complacency precedes the fall, the thing most people fail to mention is complacency can last for a really, really long time. When confident owners refuse to sell, supply stays tight and prices remain firm. This will end badly at some point because it always does, but this is not that point. In the meantime enjoy the ride.
As for what happens in January, I have thoughts on 2020 but will save those for another post. Sign up for FREE Email Alerts so you don’t miss those thoughts.
What’s a good trade worth to you?
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Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM
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