May 19

Why even bulls should be taking profits near 4,200

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 started Friday’s session with nice gains, adding to Wednesday’s and Thursday’s big rallies. Unfortunately, the buying enthusiasm peaked in those early hours and the index eventually closed in the red, down a fairly modest 0.1%.

Debt ceiling negotiations broke off without plans to resume. Debt ceiling squabbles haven’t been a problem for this market thus far, but we haven’t been this high either. Higher prices mean higher expectations, which makes it easier for hopeful investors to end up disappointed.

Lucky for readers, Friday’s cooling exactly what I described in Thursday evening’s free post:

As for what comes next, momentum is still higher, but 400 points later is the wrong time to be jumping aboard this rebound. The big and easy profits came to those of us that had the courage to buy months ago.

I can see this going a little higher, but we are falling into the slower summer season and I don’t see a lot of institutional buying happing until after summer is over. That means this is the time to be taking profits, not adding new money.

We don’t need to sell everything here, but it makes sense to lift our stops and start peeling off some partial profits. It is amazing how good it feels to put some well-deserved profits in our pockets.

Sign up for my FREE email alerts so you don’t miss the market’s next big move

Is Friday’s selling the start of the next big pullback? No, of course not. But recent gains flip the risk-reward against us. Higher prices increase the odds of a near-term step back, and that’s exactly what we got Friday.

There is no reason to read anything more serious into Friday’s price action. As expected, we finally challenged and even broke through 4,200 resistance, but now the sideways grind resumes. Friday’s cooling price action is nothing more than that.

We buy when it is hard to buy (low), and we sell when it is hard to sell (high). Follow those simple rules and we will always outperform the average trader buying when it is easy (high) and selling when it is easy (low).

Is this the start of a bigger selloff? No, probably not. But it could be, and I’m not willing to bet this week’s pile of profits on a trade with such a poor risk/reward. (The potential profits left in this move are far smaller than the risks hanging over us.)

This is a choppy market and if we’re not taking profits when we have them, we will be taking losses a few days later. The market is still acting well and we don’t need to run for the hills, but it definitely makes sense to peel off some profits, putting a nice chunk of change in our pocket and lowering the risk if this selling continues next week.

As for Monday’s session, start buying back in if the break above 4,200 resistance turns into a powerful short-squeeze. In the other direction, if the air continues coming out of this week’s rebound, the most confident and aggressive can start shorting the cooling off.

Sign up for my FREE email alerts so you don’t miss the market’s next big move

If you find these posts useful, help me out by liking and sharing them!

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.

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

Follow Jani on Twitter

May 18

Why cynics got this trade so wrong and what’s coming next

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 added another 1% Thursday and hit 4,200 for the first time since last September.

While this strength caught a lot of skeptics on the wrong side of the market, I’ve been calling for 4,200 for weeks.

Here is what I wrote back in early March when the index was probing multi-month lows:

As ugly as Thursday’s session [March 9th] looked, we can’t read too much into this price action because this wave of selling was nothing more than handwringing ahead of Friday’s [Feburary] employment report.

“Sell the rumor and buy the news” happens often enough that people have given it a name. All of this week’s bloodletting actually improved the odds of a bounce on Friday. Once a nervous owner sells all of his stocks, his opinion no longer matters. So for every nervous owner that bailed out on Thursday, they lost their ability to vote on what comes next.

And more than just taking away weak owners’ votes, these worrywarts have been replaced by confident dip-buyers. If these buyers were afraid of Friday’s employment report, they wouldn’t have been jumping in Thursday afternoon. Out with the weak and in with the strong. That doesn’t sound like a bad thing to me.

Odds are good that this week’s selling priced in a lot of bad news and anything that meets expectations, or better yet, turns out less bad than feared, will lead to a nice pop.

The market bottomed two sessions later and now we are up more than 10% from those lows. Anyone that caught this fairly obvious bounce in a 3x ETF, like I do, is sitting on a really nice pile of profits.

Sign up for my FREE email alerts so you don’t miss the market’s next big move

Now to be clear, I’m a trader and I haven’t been holding the same trade since early March, but I’ve been buying the dips and selling the bounces the entire way because I recognized this market wanted to go higher, not lower. Trading gets a lot easier and is far more profitable when we have the direction right.

As for what comes next, momentum is still higher, but 400 points later is the wrong time to be jumping aboard this rebound. The big and easy profits came to those of us that had the courage to buy months ago.

I can see this going a little higher, but we are falling into the slower summer season and I don’t see a lot of institutional buying happing until after summer is over. That means this is the time to be taking profits, not adding new money.

We don’t need to sell everything here, but it makes sense to lift our stops and start peeling off some partial profits. It is amazing how good it feels to put some well-deserved profits in our pockets.

Sign up for my FREE email alerts so you don’t miss the market’s next big move

If you find these posts useful, help me out by liking and sharing them!

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.

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

Follow Jani on Twitter

May 17

The simple mistake bears keep making

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 popped 1.2% Wednesday, bouncing back from Tuesday’s mild selling as the index closed at the highest levels in over two weeks.

One day down, the next day up. I’ve been reminding readers for weeks that this is a choppy, sideways market, not one on the verge of collapse. As I wrote last week:

There have been more than enough excuses for this market to break down, yet every time the bears try, stocks bounce back in their face. A market that refuses to go down will eventually go up.

Sign up for my FREE email alerts so you don’t miss the market’s next big move

Wednesday’s big bounce was not a surprise. If inflation, rate hikes, employment, banks, or debt ceilings were going to break this market, it would have happened by now.

Bears betting against this market are giving money away. Not that I mind, because their denial puts money in my pockets. But just because they are too stubborn to learn doesn’t mean we should allow them to scare us into following them down the drain.

I’m not expecting a big breakout anytime soon, especially since we are falling into the slower summer months, but a push to 4,200 resistance and even a modest poke above this level is in our near future. Maybe it doesn’t happen until next week or the week after, but no matter what the cynics claim, this market wants to go higher, not lower.

Sign up for my FREE email alerts so you don’t miss the market’s next big move

If you find these posts useful, help me out by liking and sharing them!

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.

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

Follow Jani on Twitter

May 15

What makes this market so easy to read right now

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Monday up 0.3% following another back-and-forth session.

Another day gone and not much changed. We are transitioning into the slower summer months and shouldn’t expect big fireworks. Rate hikes are paused, inflation is inching lower, employment remains robust, and the economy is slowing in a constructive, soft landing kind of way.

The debt-ceiling debate is ramping up, but in a divided government, this is standard operating procedure. Anyone expecting a deal before the deadline doesn’t understand how negotiations work.

If this is like all of the other contested debt ceiling standoffs, it will get pushed to the edge, and it will get ugly, but ultimately, something will get passed. The consequences are too great for this to end any other way. US debt got downgraded in 2011 when Republicans threatened default and the shockwaves that were created won’t be forgotten anytime soon.

Without a doubt, our politicians can screw this up, but it will get resolved eventually because there is no other choice. So from that perspective, as a trader, I would love to see stocks crash over the near term because buying irrational discounts is the easiest way to make lots of money very quickly.

At the same time, most stock owners know this too, so I doubt many will hit the panic button and sell their favorite stocks at steep discounts no matter how cantankerous this debt ceiling standoff gets.

If we could only be so lucky to see a big selloff, unfortunately, I don’t think we will be that fortunate. Until something changes, I’m sticking with what is working and that is waiting for the index to rally up to, and through 4,200 resistance. The market is taking its time, but as I’ve been saying for a while, something that refuses to go down will eventually go up.

Stocks climb a wall of worry, and so far, everything is still pointing higher.

Sign up for my FREE email alerts so you don’t miss the market’s next big move

If you find these posts useful, help me out by liking and sharing them!

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.

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

Follow Jani on Twitter

May 11

Why the trend is still higher

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Thursday’s session took the S&P 500 on another wild ride as steep opening losses bounced off of those early lows. While the index finished down -0.2%, that was actually a fairly robust ending to a day that traded as low as -0.7%.

As I’ve been saying for a while, this is a choppy sideways market and it is handing these whipsaws out in spades. One day’s up becomes the next day’s down.

But if we zoom the chart out and look at the daily and weekly patterns, the market is actually trading well with multiple bounces off of 4,050 support.

There have been more than enough excuses for this market to break down, yet every time the bears try, stocks bounce back in their face. A market that refuses to go down will eventually go up.

It is a worrying sign if the market is refusing to rally on good news, but the sentiment is overwhelmingly bearish as trader chatter continues to obsess over inflation, interest rates, tight employment, bank failures, and a looming recession.

There is a popular saying in the market that stocks climb a wall of worry, and the indexes trading near multi-year highs is a classic example of that.

For all the excuses the market has to go down, it keeps going up. Rather than argue with the market, follow its lead.

Until something changes, keep buying the bounces. At this point, it is only a matter of time before we are testing 4,200 resistance and even poking our heads above this key level.

Sign up for my FREE email alerts so you don’t miss the market’s next big move

If you find these posts useful, help me out by liking and sharing them!

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.

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

Follow Jani on Twitter

May 10

How smart money handled Wednesday’s wild ride

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 finished Wednesday’s session 0.4% higher after inflation fell to 4.9% and this key metric is now at the lowest level in two years.

While the above statement makes it seem like Wednesday was a perfectly reasonable session, lift the hood and you see it was anything but. An 0.8% opening gain disintegrated into a 0.5% loss before bouncing nearly 1% to finish up 0.4%.

Curbing inflation is critical for the Fed and the economy, so obviously a lot of investors were paying attention. The result fell in the middle of the road, not too hot and not too cool, but that didn’t stop impulsive traders from overreacting to it.

But this impulsive behavior isn’t new. This is a volatile market and traders have been overreacting to headlines and price action for a long time.

For as wild as the ride was, Wednesday’s late rebound confirms this market is still on solid ground and that 4,200 is still the target. But as is usually the case, getting there is anything but a smooth ride.

As someone positioned for the bounce up to 4,200, the midday tumble was disappointing and it even convinced me to lock in some of Friday’s profits proactively. But just because I sell a position doesn’t mean I’m giving up on it. As easy as it is to buy back in, we should never be afraid of getting defensive when something doesn’t feel right.

While we can’t jump every time we see our shadow, there are instances like Wednesday when the market does something unexpected. As much as I liked Friday’s rebound, I’m not willing to ride this position back into the dirt and I always have a backup plan in case things go wrong.

But just as important as getting out is being willing to get back in after we recognize the weakness was a false alarm. Sometimes we get lucky and the false alarm moves far enough that we can buy back in at even lower prices. Other times, like Wednesday, the whipsaw is so compressed that we are lucky to get back in near where we got out.

It is a hassle to sell and then buy back a few hours later, it sure beats allowing a profitable position to turn into a loser.

Wednesday was a wild session, but the refusal to break down means the near-term trend is still higher.

Sign up for my FREE email alerts so you don’t miss the market’s next big move

If you find these posts useful, help me out by liking and sharing them!

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.

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

Follow Jani on Twitter

1 … 40 41 42 43 44 … 261