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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 skidded 0.8% Friday, making this the fourth loss out of the last five sessions.
Nothing much changed in the headlines. Inflation remains higher than the Fed wants, but the economy is stubbornly resilient in the face of rising interest rates. A few months ago, investors were obsessed with the half-empty portion of the glass. Now all they see is half-full.
But with a massive amount of buying in the rearview mirror, we need to find new buyers to keep pushing prices even higher, which is getting increasingly difficult. That doesn’t mean it can’t happen, just that the odds of a near-term cooling off are growing with each passing day.
The rally paused this week, and the index remains stuck under 4,400 resistance. Get back above this key psychological level and it is full steam ahead. But until that happens, the smart move is trading this cooling off.
As I explained in Tuesday’s Free Analysis: “Why Tuesday’s step back still has room to run”
At this point, this violation of 4,400 is guilty until proven innocent. If we can’t get back above 4,400 Wednesday, position yourself for more selling. The most aggressive can keep holding their shorts with stops near [last] Friday’s close. For everyone else, keep waiting and watching for the real bounce because Tuesday afternoon probably wasn’t it.
No one knows what the future holds. The best we can do is trade what’s directly in front of us, and right now, that means trading this latest cool-down. We rallied hundreds of points over the last few weeks, and it takes more than 50 points and a few days to reset the clock.
Shorts can keep holding their shorts and those that want to buy the dip need to sit on their hands a little longer because this dip still has a ways to go before it is done.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 added 0.4% Thursday, ending a three-day skid that pulled the index off of 52-week highs.
We didn’t need bullish headlines to rally up to 4,400, and that means we don’t need bearish headlines to pull back from those highs either.
Stocks go up and stocks go down, that’s what they do. As much as people want to believe every headline matters and every movement is based on some fundamental driver, the simple truth is the market is like a toddler with ants in his pants and most of the time it moves enthusiastically for no reason at all.
That said, these reasonless moves are not random. Trends are more likely to continue than reverse, but eventually, every bit of up is followed by a bit of down.
Currently, the market finds itself at one of those tipping points where either momentum keeps pushing the indexes higher, or we’ve come far enough that it is time to start going in the other direction.
It’s been a great run from the March lows, but that also means we are getting close to the next down wave. While Thursday’s modest gains were a relief for bulls, the truth is, this 0.4% gain was anything but a decisive rebound.
Everyone knows stocks don’t move in straight lines and declines are littered with green days. The odds are good Thursday’s gains was nothing more than a little bounce on our way lower.
Now to be clear, I’m not a bear and I’m definitely not calling for a crash, but rallying 200 points from the start of June and 600 points in four months means the time for rest is close, if it is not already upon us.
I started shorting this market Friday and my stops have already been moved past my entry points, turning this into a low-risk/high-reward trade. There isn’t anything else do other than relax and let the profits come to me.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 slipped on Wednesday, giving up 0.5% and falling for the third day in a row.
No doubt the financial press found some excuse to justify Wednesday’s decline, but the simple truth is stocks move in waves. After several weeks of up, it’s time for a bit of down. Two steps forward, one step back. Rinse and repeat. This latest wave of selling is no more meaningful than that.
But as I’ve said many times before, the market loves symmetry, which means the inevitable step back will reflect the scale of the prior runup. That means this step back has the potential to offset a four-month rally that added 600 points.
Now, we don’t need to offset the entire run from the 2023 lows, but even retrenching a portion of the rally from 4,200 will require more than three modest days of selling.
I still like this market and am in no way calling for a crash back to the lows. But I also know stocks move in waves, and it’s been a great ride to this point. At the very least, even bulls should be expecting a near-term cooling off, and 4,200 support is very much on the table.
We take profits when we have them because if we don’t, we won’t have profits left to take. That means longs should have already been locking in some of their profits proactively and protecting the rest with nearby trailing stops.
As for the bold, there is still more downside left in this short, and we are nowhere near capitulation. Keep holding those shorts and move our stops down to at least our entry points, making this a low-risk/high-reward trade.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 fell nearly 1% in early trade Tuesday as second thoughts came roaring back following last week’s strong surge higher.
The index slipped under 4,400 at the open and it wasn’t able to reclaim this psychologically significant level despite a nice midday bounce.
This is a tipping point. Either the index gets back above 4,400, or it doesn’t. If we get turned back by this level Wednesday, the selling will likely continue for a few more days.
On the other hand, if the index closes decisively above 4,400 Wednesday afternoon, then the worst of the selling is already behind us and higher prices are coming our way.
My intuition and experience tells me the selling still has a way to go before it is finished. The market loves symmetry, and big runs like we experienced over the last few weeks are always followed by similarly enthusiastic step-backs.
At this point, this violation of 4,400 is guilty until proven innocent. If we can’t get back above 4,400 Wednesday, position yourself for more selling. The most aggressive can keep holding their shorts with stops near Friday’s close. For everyone else, keep waiting and watching for the real bounce because Tuesday afternoon probably wasn’t it.
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