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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 added a respectable 0.6% on Monday, extending Friday’s 0.7% bounce, and the index is setting up for another run at 4,450 resistance.
Lucky for readers of this free blog, we saw this rebound coming last week when I wrote on Friday:
The market’s natural inclination is to go up, and breakdowns are breathtakingly fast. Combine those two concepts, and Friday’s rebound definitely favors the bulls. If we were going to break down, prices would have taken another tumble on Friday.
It doesn’t take much to trigger the next wave of selling, but so far, this [rebound] is acting well enough to keep giving it the benefit of the doubt. At this point, I’m cautiously optimistic [last] Thursday’s tumble was the fluke, not [September 18th’s] rebound. For the time being, I’m a buyer of Friday’s bounce, with stops not far behind.
If the bounce continues on Monday, I let those profits come to me. If the selling resumes, I get out for a minor loss and try again next time. Lots of upside and limited downside. What’s not to like about this trade?
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As expected, the index rallied on Monday, and I was able to move my stops up to my entry point, turning this into a low-risk trade. If the selling resumes on Tuesday, I get out near my entry points, no big deal. If the bounce continues, I let all of those 3x ETF profits come to me.
Low-risk/high-reward trades are what we dream of. But these setups are only possible when we have the courage to jump aboard a rebound early.
As for what comes next, I like what I see. No one is talking about the Chinese economy anymore. If the market doesn’t care, then we don’t care. Powell’s speech last Friday couldn’t bring out the sellers either. And, we violated 4,400 support multiple times over the last two weeks without triggering another follow-on wave of defensive selling, telling us there is not much supply left under our feet.
A market that refuses to go down will eventually go up, and that’s the way this trade is coming together. Stick with what is working and keep lifting our stops.
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By Jani Ziedins | End of Day Analysis
Free After-hours Analysis:
Friday’s session took the S&P 500 on another wild ride. The index opened up 20 points, then fell 40 points from those early highs, before finally rebounding and closing with a respectable +0.7% gain. Watch that price action too closely, and one is bound to get whiplash.
The big economic headline was Powell’s speech from Jackson Hole, where he stressed a cautious approach to further rate hikes. That was enough to keep the market from tumbling into another tailspin, but it wasn’t enough to get buyers to start chasing prices higher with reckless abandon. In the end, we recovered half of Thursday’s tumble, which was a fairly decent showing, all things considered.
Lucky for us, this performance is exactly what I was looking for. As I wrote Thursday evening:
As for what comes next, last Friday’s bounce is still alive, even if it is on life support. If we trade well Friday afternoon, Thursday’s selling will be nothing more than the herd getting spooked and panic selling. On the other hand, if the index falls under Friday’s lows, anything is possible.
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The index held above Friday’s lows and closed decently well, making this a buying opportunity.
The market’s natural inclination is to go up, and breakdowns are breathtakingly fast. Combine those two concepts, and Friday’s modest rebound definitely favors the bulls. If we were going to break down, prices should have taken another tumble on Friday.
We are still in the early stages, and any stability near the lows is fragile. It doesn’t take much to trigger the next wave of selling, but so far, this is acting well enough to keep giving it the benefit of the doubt.
At this point, I’m cautiously optimistic this Thursday’s tumble was a fluke, not last Friday’s rebound. For the time being, I’m a buyer of Friday’s bounce, with stops not far behind.
If the bounce continues on Monday, I let those profits come to me. If the selling resumes, I get out for a minor loss and try again next time. Lots of upside and limited downside. What’s not to like about this trade?
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 opened Thursday morning above 4,450 as investors cheered NVDA’s AI-fueled earnings results. Unfortunately, the enthusiasm was short-lived. Not only did the index give back all of those opening gains, but it lost all of Wednesday’s pop, too.
Rising interest rates and the index running into overhead resistance at 4,450 and the 50dma were too much for the index to handle. Once the cracks started showing, skittish owners scrambled for the exits.
Lucky for us, running into resistance at these key technical levels doesn’t surprise regular readers. As I wrote in Wednesday’s free post titled: “Why smart money is already eyeing the exits”
Capturing a big portion of a 100-point move in a 3x ETF is real money! That’s why we are already shifting our mindset from offense to defense. Start looking for an opportunity to harvest profits. 4,450 is coming up quickly, which will bring prior support/resistance and the 50dma into play. At the very least, these levels will be a minor speed bump. At worst, we could hit hour heads and tumble back to the lows, so we need to be watching how the market behaves at these levels over the next couple of days.
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I will be honest; I was fairly certain I was collecting profits too soon when I pulled the plug Wednesday afternoon, and I never would have guessed the index would tumble as aggressively as it did on Thursday. But at the same time, I’ve been doing this long enough that nothing surprises me, and that’s why I was happy to sell “too early” Wednesday afternoon when I had a nice pile of profits.
This is a choppy market, and if we’re not taking worthwhile profits when we have them, the market will take all of those profits back.
As for what comes next, last Friday’s bounce is still alive, even if it is on life support. If we trade well Friday afternoon, Thursday’s selling will be nothing more than the herd getting spooked and panic selling. On the other hand, if the index falls under Friday’s lows, anything is possible. Lucky for us, we pulled the plug long before that can happen.
Buy a nice bounce on Friday and sell a continuation of Thursday’s selloff. As jumpy as traders are, something is going to happen, and all we need to do is hop on and enjoy the ride.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
What a difference a day makes. Tuesday’s second thoughts were smashed by Wednesday’s 1.1% rally that surged through 4,400 and kept going.
As I wrote in Tuesday’s free analysis:
Keep holding Friday’s purchases with stops already moved up to at least our entry points. If the rebound continues, we let the profits roll in. If the selling resumes, we get out near our entry points and try again next time. Lots of upside and very little downside, what’s not to like about this trade?
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The market loves to make us second-guess our trades. If it wasn’t trying to get us to abandon our positions, it wouldn’t be doing its job. And as we all know, the market is very, very good at its job. But at this point, routine second-guessing is all that last week’s selloff appears to be. Headlines remain stable, and this rebound is simply the realization that last week’s Chinese fears were overblown, at least as far as U.S. equities go.
Capturing a big portion of a 100-point move in a 3x ETF is real money! That’s why we are already shifting our mindset from offense to defense. Start looking for an opportunity to harvest profits. 4,450 is coming up quickly, which will bring prior support/resistance and the 50dma into play. At the very least, these levels will be a minor speed bump. At worst, we could hit hour heads and tumble back to the lows, so we need to be watching how the market behaves at these levels over the next couple of days.
Remember, taking profits too early is always better than holding too long and letting all of these profits escape. Just because we lifted our stops above our entry points doesn’t mean we should let the index fall back to our stops before locking in profits. And remember, buying and selling are not binary decisions. We can always take some profits and let the remaining portion of our position ride, hedging our bets by taking the best from both approaches.
Keep holding, lifting stops, and start moving toward the exits.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 gave up -0.3% on Tuesday after starting the session up a respectable 0.4%
Nothing much happened in the headlines, and this continues to be a sentiment based trade echoing last week’s Chinese rate cut.
As I said last week, it’s been forever since China mattered to U.S. stocks, and I don’t think that is going to change here. Instead, the market cooled off for no other reason then it needed to cool off, and it didn’t really matter what the headlines were.
Since there isn’t much bite to last week’s headlines, it won’t require a massive capitulation to reverse itself and pull out of this tumble. Odds are decent Friday could have been the worst of this latest wave of selling.
Luck for readers, we were ready for it. As I wrote on Friday:
By acting decisively Friday morning, we already have a nice profit cushion and can move our stops up to our entry points, greatly reducing our risk. If this bounce is the real deal, the profits will keep rushing in. If this is another fake bottom on our way lower, we get dumped out near our entry points and get to try again next time, no harm, no foul.
As for next week, if the index retreats back to Friday’s intraday lows, all bets are off. But until that happens, we have the green light to keep holding, adding, and lifting our stops.
We will learn a lot about the market’s mood over the next three sessions. That’s when either the buyers or the sellers run out of ammunition and the market moves in the opposite direction. A strong performance in the back half of the week and the bounce is still on. Fall back to the lows and bears are still in c0ontrol. It really is that simple.
At this point, the bounce is still alive, and I’m giving it the benefit of the doubt until it proves me wrong.
Keep holding Friday’s purchases with stops already moved up to at least our entry points. If the rebound continues, we let the profits roll in. If the selling resumes, we get out near our entry points and try again next time. Lots of upside and very little downside, what’s not to like about this trade?
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 ended Friday’s session exactly where it left off Thursday. While it is tempting to call 0.0% a tie, this actually counts as a win for the bulls.
First, following three big down days, not falling for a fourth session is a meaningful accomplishment. Big stock crashes accelerate lower, and Friday’s 0.0% breaks our losing streak.
Second, stocks started Friday’s session deep in the red. Lucky for us, that opening low was as bad as it got, and stocks spent the rest of the session climbing out of that hole, ultimately recovering all of those losses by the close.
Luckily, my readers were not surprised by Friday morning’s rebound. This is the exact setup I told readers to be ready for Thursday evening, and hopefully, you were one of the many people who profited from this great setup:
As bad as Thursday looked, the thing to remember is this is the way it usually feels right before the bounce. We can debate how bad it needs to get before this gets good, but without a doubt, we are closer to the bottom than we were on Tuesday or Wednesday.
The nice thing about one-way selloffs like Thursday is they tend to bounce early the next session. That means if we buy early enough, that initial bounce will give us a handy profit cushion to play with.
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Friday morning, confident stock owners refused to join the herd selling. That’s all it took. No matter how bad things feel, once we run out of sellers, prices stop falling. That’s basic supply and demand.
At this point, confident owners are telling the market that enough is enough. That doesn’t mean the selloff cannot continue next week or next month. But for the moment, the bulls are back in charge.
This bounce is only a few hours old and remains fragile, but this is the price action we were waiting for.
By acting decisively Friday morning, we already have a nice profit cushion and can move our stops up to our entry points, greatly reducing our risk. If this bounce is the real deal, the profits will keep rushing in. If this is another fake bottom on our way lower, we get dumped out near our entry points and get to try again next time, no harm, no foul.
As for next week, if the index retreats back to Friday’s intraday lows, all bets are off. But until that happens, we have the green light to keep holding, adding, and lifting our stops.
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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?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
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