Menu
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Thursday’s S&P 500 session started out innocently enough with the index showing a modest gain, unfortunately, it was all downhill from there as the index shed nearly 2% by the close.
As ugly as Thursday’s session 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 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And more than just taking away weak owners’ votes, these worrywarts have been replaced by confident dip-buyers.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.
As for what happens Friday, I have zero idea what the employment report will say, and more than that, even if I knew the number, there is no telling how the market will react to it anyway.
Is good still bad, or have we switched back to good being good again? Maybe stocks rally on bad, but what if it’s really bad? How bad is too bad??? No one knows what Friday holds and it isn’t even worth the effort trying to figure it out.
Rather than guess about the employment numbers and then guess about the market’s reaction, I’ll wait for the market to tell me what it wants to do. This is one of those situations where I’d rather be a little late than a lot early.
Give the market 30ish minutes Friday morning to get the knee-jerk out of its system. After that, the market won’t be able to hide its true intentions and it’s time to jump aboard the resulting move.
That said, 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.
I will let the gamblers place their bets ahead of the employment report. I’m more than happy to show up a little late to this party if it dramatically lowers my risk. If this really is the start of the next big, multi-day move, being 30 minutes late isn’t going to change much.
But as I’ve been saying for a while, I believe we are stuck in a trading range. All of the hype surrounding Friday’s employment numbers will most likely result in a letdown and this will be old news by Friday afternoon. If we really are stuck in a trading range, Thursday’s retreat to the lower end of the range means stocks are buyable and I will be more than happy to snap up these discounts once all of the dust clears later Friday morning.
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 @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Wednesday turned into a mixed session for the S&P 500.
The index spent most of the day trading modestly in the red as Powell continued testifying in front of Congress for a second day, but a late surge of buying pushed the index into the green, closing up a somewhat trivial 01.%.
While no one is getting excited over a 0.1% gain, on the heels of Tuesday’s 1.5% tumble, any gain, even a tenth of a percent is an accomplishment.
As I’ve been saying for a while, if this market was fragile and vulnerable, stocks would have crashed a long time ago. Sure, inflation remains a stubborn problem that the Fed is still trying to fix, but we’ve been living under these conditions for a year. At some point, no matter how bad the news, eventually it gets priced in and stops mattering. And right now, this market seems okay with stubbornly elevated inflation.
Without a doubt, stocks could fall to fresh lows, but we need the headlines to be truly shocking and unexpected, simply more of the same isn’t going to break this market. Until something changes, expect this choppy sideways trade to continue.
Both the bulls and the bears are wrong on this one. We are not racing up to the highs and we are not crashing back to the lows any time soon. I will reevaluate my outlook if prices crash under last week’s lows, but until that happens, I will continue buying every bounce and taking profits early and often because nothing in this market will last long.
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 @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 retreated 1.5% Tuesday after Powell threw cold water on last week’s rebound.
I’ve said it before and I will say it again, this is a choppy market and that means the only people making money are the ones locking in profits when they have them.
Both bulls and bears are too busy arguing with each other to make money. Bulls insist every bounce is the start of the next big move higher and bears gloat every time prices fall.
Unfortunately, this approach means both sides are making the exact wrong moves at the exact wrong time. Bulls are buying the highs when they feel the most confident and end up selling the lows a few days later when they get scared. And bears are doing the mirror image, gleefully shorting the lows and then getting spooked and covering after prices blow up in their face.
Buying strength and selling weakness works great in directional markets, but this is not a directional market, so everyone trading that way is getting killed.
Last week I told readers to buy the next bounce in my post titled, “Should we be worried about this test of the recent lows?” But equally important, I also warned readers to take profits quickly because they wouldn’t last.
I will be there to buy the next bounce and the one after that. But because I know this is a low-energy environment, I will be quick to take profits because it won’t be long before those profits are gone.
A bigger directional move is coming, but it is still a way out. Until then, keep taking profits early and often.
Sign up for my FREE email alerts so you don’t miss the market’s next big move
Well, here we are a few days after stocks surged impressively from Thursday’s lows. Unfortunately, a big chunk of those profits have already been erased. This was an extremely profitable trade for everyone that treated it like a trade. For everyone else, they lost even more money reflexively buying Friday’s strength and selling Tuesday’s tumble.
Trading isn’t hard once we shed our bullish and bearish biases and start trading the market instead of our opinions.
As for what comes next, I will keep buying weakness and selling strength until the market tells me it is ready for the next big directional move. Until then, expect this volatile sideways chop to continue.
Powell will continue speaking to Congress on Wednesday, we have the monthly employment report coming Friday morning, and more inflation data next week. Expect these wild whipsaws to continue.
If you are not taking profits when you have them, then you will end up taking losses when the market inevitably swings in the other direction.
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 @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 popped to multi-week highs Monday morning as bears continued getting blown out of their short positions.
As has been the case for a while, this recent price action is not being driven by meaningful changes in the fundamentals. Instead, this is a sentiment trade and the latest wave of overwhelming bearishness made a bounce inevitable.
I wrote about this golden opportunity in last week’s post titled “Why savvy traders are getting greedy“:
[A]s far as contrarian trading signals go, the market’s pessimism suggests this is the time to be looking for buying opportunities. The last time the AAII sentiment survey had this few bulls was back in early January, which as it turned out, was a great time to buy stocks…
By now, everyone knows what happened next.
Sign up for my FREE email alerts so you don’t miss the market’s next big move
Unfortunately, Monday’s early strength fizzled and prices retreated back to Friday’s close. But that shouldn’t surprise readers either, as I warned them Friday evening:
[W]e need to keep expectations in check. Just as there wasn’t a real reason to be crashing, there isn’t a real reason to be rallying. That means we shouldn’t expect a big rally and this rebound is simply a normal and routine gyration higher following a bit of down.
Rather than get cocky and complacent with my newfound success, I recognize this is still a choppy market and I don’t want to let this pile of profits escape, so I’m already lifting my trailing stops and getting ready to lock in worthwhile profits if the selling returns next week.
That outlook proved to be especially helpful Monday morning as all of those easy and early gains evaporated.
Stocks spend more time going sideways than up or down and that means we should be wary of predictions of an imminent crash or surge to record levels. Stock prices fluctuate, that’s what they do and we shouldn’t be surprised when prices bounce from the lows and stall after reclaiming a big chunk of lost ground.
Powell is testifying in front of Congress over the next couple of days and we have the monthly employment report due on Friday. Both of those have the potential to move the market, but if the headlines continue coming in near expectations, expect this sideways grind to continue. Buy weakness, sell strength, and repeat as many times as the market lets us.
As easy as it is to buy back in, we should never be afraid of taking worthwhile profits off of the table. Rather than make the same mistake overconfident bears made near the lows, we want to ensure we protect these profits and it is worth locking in some partial profits proactively. Sure, we are probably selling a little too early, but by putting some profits in our pocket and reducing our exposure, it gets a lot easier to ride through these inevitable whipsaws.
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 @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 exploded 1.6% higher Friday and easily reclaimed 4k support.
While I’m sure the financial press came up with a justification for this latest wave of buying, the simple truth is we ran out of sellers and a rebound was inevitable.
A month of selling is a long time and the lack of acceleration under 4k support told us supply was drying up. As scary as the last few weeks felt, we actually haven’t fallen all that far from recent highs.
As I reminded readers over the last few weeks, every routine dip feels like it is the start of something much bigger because if it didn’t, no one would sell and prices wouldn’t dip in the first place.
As expected, without a significant and unexpected fundamental driver changing a large number of peoples’ minds, this latest wave of selling petered out and this bounce was inevitable.
While it is easy to point out these things after the fact, I’ve been telling readers this wave of buying was just around the corner. Here is what I wrote four days ago in a post titled, “Why savvy traders are getting greedy“:
As far as contrarian trading signals go, the market’s pessimism suggests this is the time to be looking for buying opportunities. The last time the AAII sentiment survey had this few bulls was back in early January, which as it turned out, was a great time to buy stocks because the index rallied nearly 10% over the next few weeks.
Sign up for my FREE email alerts so you don’t miss the market’s next big move
Now, some of my critics will point out that even a broken clock is right twice a day. And that’s true, I’ve been trying to buy this bounce for a while, and in the market, early is the same thing as wrong. But I knew the odds of failure were high and that’s why I was buying each of those previous bounces with a partial position and a nearby stop. When the previous bounces failed, I got out for a small loss on a partial position.
While I’d much rather be making money, small losses aren’t the end of the world. And Friday was when the patience and persistence finally paid off. After taking a few small losses on previous buys, I was in the right spot at the right time when Thursday’s selling stalled and prices bounced hard.
I got in early and when that trade kept working, I quickly scaled up my position. So yes, I was wrong and collected a couple of small losses along the way, but Friday was the day when it all came together and I made a pile of money on a full position.
Small losses and big wins are the way we beat this game.
That said, we need to keep expectations in check. Just as there wasn’t a real reason to be crashing, there isn’t a real reason to be rallying. That means we shouldn’t expect a big rally and this rebound is simply a normal and routine gyration higher following a bit of down.
Rather than get cocky and complacent with my newfound success, I recognize this is still a choppy market and I don’t want to let this pile of profits escape, so I’m already lifting my trailing stops and getting ready to lock in worthwhile profits if the selling returns next week.
Remember, we only make money when we sell our winners. We don’t have to look far to find bears who wish they were a little more proactive in locking in their profits.
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 @crackedmarket
By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 continues probing recent lows and is testing the 200dma.
Headlines haven’t changed in a meaningful way since January, but the market’s mood couldn’t be more different. The half-full outlook that 2023 started with has given way to this recent wave of hand-wringing. Is this the result of a fundamental change in the market’s outlook, or just part of the market’s routine mood swings? Good question.
The market rallied 700 points from the October lows, so this 250-point retreat from recent highs shouldn’t surprise anyone. Two steps forward, one step back has always been the name of the game, and at this point, this latest slip from recent highs doesn’t look any more severe than one of those routine steps back.
But as long as we continue testing the lows, we are always at risk of making new lows. But as long as most owners keep shrugging and holding, any selling will be contained. If this crop of owners was skittish and prone to impulsive selling, we would have seen the bottom fall out a long time ago.
I’d love to see a buyable rebound from these levels, but the market is in charge and it dictates the pace. If we need to consolidate for a few more weeks, then I have no choice but to keep waiting and watching.
I will be there to buy the next bounce and the one after that. But because I know this is a low-energy environment, I will be quick to take profits because it won’t be long before those profits are gone.
A bigger directional move is coming, but it is still a way out. Until then, keep taking profits early and often.
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 @crackedmarket
You must be logged in to post a comment.