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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Wednesday was another volatile session for the S&P 500 as early gains gave way to midday losses that were then recovered by the close. After it was all said and done, the index finished up a respectable 0.4%. Not bad for a day’s work.
Aside from the developing situation in the Middle East, economic headlines haven’t changed in a meaningful way over the last few weeks. Wednesday’s gains make this four up-sessions in a row, and the index continues bouncing back nicely from September’s oversold levels.
As is often the case, sometimes we have to look like idiots before we can be geniuses. That was definitely the case buying last week’s lows. Lucky for me, I don’t I don’t have a problem looking like an idiot. In fact, the more people disagree with me, the better I feel about my position.
As I wrote in last week’s free analysis:
I have no idea if 4,200 support will hold up next week, but it is holding right now, and that is good enough for me. I bought [last week’s] bounce and already lifted my stops up to my entry points, turning this into another low-risk trade.
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Without a doubt, ending like a genius is far better than ending like an idiot. Just ask all of the greedy bears that watched nearly 200 points of profits evaporate in front of their eyes. Nothing is wrose than watching a nice profit turn into a painful loss.
But rather than get cocky and gloat, these 3x profits are making me nervous. Everyone knows stocks move in waves, and that means after a nice bit of up, it is time to collect our worthwhile profits and get ready for the next trade.
Without a doubt, I’m selling too early, but we only make money when we sell our winners, and I really like these 3x profits. It would be criminal to allow greed and hubris to make me join the bears by holding too long and watching all of my profits disappear.
The 50dma and 4,400 resistance is just above our heads, making this a good place to collect our 3x profits. If the rally wants to smash through 4,400 next week, it is easy enough to buy back in. Until then, I nothing beats the calm and clarity that comes from sitting on a pile of profits while enjoying the safety of the sidelines.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
War broke out in the Middle East over the weekend, and no surprise, the S&P 500 opened Monday’s session in the red.
While fighting between Israel and Hamas doesn’t have a direct impact on U.S. corporate profits, the tension sent oil prices higher, adding a tax on nearly all economic activity. But by midday, equity traders breathed a sigh of relief when oil prices only rose a few percent, allowing stocks to rebound and finish Monday’s session nicely in the green.
As bad as everything looked last week, this weekend’s headlines made them look even worse. But paradoxically, stocks bounced hard over the last two trading sessions. Luckily, this doesn’t surprise readers of this blog. As I wrote Friday evening:
[N]o matter how bad the market felt these last few weeks, these waves of selling presented savvy traders with low-risk entry points. While no one can say if the bottom is in yet, we do know the market always overdoes things, which means at some point, this wave of reflexive selling will go too far, and then it will bounce hard.
I have no idea if 4,200 support will hold…but it is holding right now, and that is good enough for me. I bought [Firday’s] bounce and already lifted my stops up to my entry points, turning this into another low-risk trade.
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As it turns out, even war in the Middle East couldn’t stop last week’s rebound from oversold levels.
If this market wants to go down, there are more than enough reasons. The fact prices are up decisively, not down, tells us September’s selloff is running out of gas and this bounce has legs.
No matter what we think, we trade the market, not our opinions. Stocks are bouncing hard, and only fools are standing in the way. All of us who were savvy enough to buy last week’s bounce should be moving our stops well above our entry points, turning this into a low-risk/high-reward trade.
This is the point where smart money is moving from offense to defense. Another strong session on Tuesday, and it will be time to start locking in some very nice 3x ETF profits.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 tumbled Friday morning after the monthly employment report came in unexpectedly strong. As has been the pattern for a while, the “good is bad” crowd hit the panic button because this increases the odds of another Fed rate hike.
The dumb thing about the “good is bad” trading philosophy is stock prices are based on corporate profits, not the Federal Funds Rate. Strong employment means people have lots of paychecks to throw around, boosting corporate profits. I don’t see how this is a negative for stock prices. And neither do most investors; that’s why those opening losses were quickly erased, and the index finished Friday up a very respectable 1.2%. There are lots of reasons for stocks to fall, but strong employment is most definitely not one of them.
As for trading opportunities, no matter how bad the market felt these last few weeks, these waves of selling presented savvy traders with low-risk entry points. While no one can say if the bottom is in yet, we do know the market always overdoes things, which means at some point, this wave of reflexive selling will go too far, and then it will bounce hard.
I have no idea if 4,200 support will hold up next week, but it is holding right now, and that is good enough for me. I bought this week’s bounce and already lifted my stops up to my entry points, turning this into another low-risk trade.
Maybe I get dumped out again next week, like my previous trades, but buying these bounces early and quickly lifting my stops meant every time I got dumped out, it was a breakeven trade. Being wrong and not losing money isn’t a bad way to trade. But it only comes from having the courage to buy these bounces early and the discipline to move my stops up once the bounce starts working.
I have no idea if Friday’s bounce will stick next week, but by getting in early, this is another low-risk/high-reward trade. If it works, I make a pile of money. If it doesn’t, I get out near my entry point and try again next time.
One of these bounces will stick. There is no reason it can’t be this one.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 bounced 0.8% on Wednesday.
Headlines haven’t changed in a meaningful way, and this rebound is nothing more than the market running out of herd-sellers and dip-buyers jumping on those discounts. Lucky for readers, this bounce is precisely what I wrote about in Tuesday evening’s free post:
The S&P 500 is quickly approaching 4,200 support and the 200 dma. No matter what the future holds, we should expect at least a modest bounce at these widely followed technical levels. Maybe we violate these levels a few days later, but over the next day or two, the odds are good prices will bounce, making this the wrong place to be aggressively pressing shorts.
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While Wednesday’s gains were not enough to offset Tuesday’s painful losses, not falling is a good first step.
I have no idea if Wednesday’s bounce is the real deal or if it is another false bottom on our way lower. But since this bounce was fairly obvious, savvy money jumped aboard it early and took advantage of the quick profit cushion it gave us.
With a fair bit of room between Wednesday’s close and our entry points, it is time to move our stops up to our entry points, turning this into a low-risk trade. If the rebound continues on Thursday, we allow those profits to come to us. If the selling resumes, we get out nearly our entry points, no harm, no foul.
Only a fool would turn his nose up at a free trade. Even if this isn’t the bottom, this is still a fantastic risk/reward and I will make this trade one thousand times over. Hopefully, you didn’t miss this great opportunity.
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If you find these posts useful, help me out by liking and sharing them!
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What’s a good trade worth to you?
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For as little as $1.28/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
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