Jun 25

Why I’m sticking with this complacent and overly bullish rally

By Jani Ziedins | Weekly Analysis

Free Weekly Analysis: 

Seven days ago the S&P 500 was in midst of a meltdown. The index shed nearly 2% that week and Friday finished at the weekly lows. And more than that, the index crashed through 4,200 support and undercut the 50dma to put a cherry on top. Could things go into the weekend any worse?

What was this week’s follow-up act? The biggest up week since February. Funny how that works.

One week down, the next week up. That’s been the tale of the tape all year and nothing changed this time. And more than just bounce back, the index finished this Friday at the highest levels in history.

Everyone knows markets cannot go up every single day, yet these same people overreact to every bump in the road. But here’s the thing, weak markets don’t keep setting record highs. Until further notice, this is a strong market and it deserves the benefit of the doubt. Every dip is buyable until the market tells us otherwise. If the selling continued Monday, then we would have taken that more seriously. But stocks popped 1.4% Monday and the rally was fully back on.

I firmly believe in stop losses, but these are not sell-and-forget triggers. As soon as we get out, we start looking for the next entry point. And this time, if the market dumped us out last week, it gave us the go-ahead signal Monday morning and the rally was back on.

As is often the case, high tends to get even higher and this market is not letting anything hold it back. Investors are in a half-full mood and they are not allowing negative headlines to weigh them down.

We are smack dab in the middle of the summer trading doldrums. But as I have been writing for a while, boring is almost always good for stocks. Something more interesting will come along, probably later this fall, but until then, high will most likely keep getting higher a few points at a time and the psychologically significant 4,300 level is next on the list.

While I wish I could come up with more thoughtful and insightful analysis, the truth is this is a simple market and it doesn’t require complex mental gymnastics to figure out what comes next. It won’t always be this easy, but until something changes, stay the course.

Without a doubt, complacency and bullishness are off the charts, but I trade the market and right now it keeps telling me it wants to go higher. So that’s what I’m sticking with.

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Jun 24

When complacency will finally catch up to this market and what to do until that happens

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

The S&P 500 popped to record levels at the open and it held those gains through the close.

Weekly unemployment claims are stabilizing at reasonable levels and investors are cheering moderation. Too high signals economic weakness and too low suggests this wave of inflation is only just getting started. Holding between these two extremes is the “just right” investors were looking for

The market’s half-full sentiment keeps getting even fuller. That’s been the theme of the year and it doesn’t look like it will change anytime soon. Owners are confidently holding for higher prices and are shrugging off all of the reasons for stocks to go lower. When owners don’t care about the negatives, supply remains tight and prices are stubbornly buoyant.

No doubt something will come along and knock us down, but until that happens, all lights are green. If this market was as fragile and vulnerable as the bears claim, it would have collapsed by now. Things will get more interesting this fall when institutional investors return from summer vacation and start positioning for year-end. But that is still months away and until then, we should expect more of the same.

Cynics claim this market is fixed/rigged/etc, but if they know that’s the case, shouldn’t they be riding along and making money instead of complaining about it? There is only one way to trade this market and that is sticking with what has been working.

The index is trading well but someone forgot to tell AMZN. But one off day doesn’t mean we should abandon a stock that has been working well for months. On the positive side, NFLX seems to be finding its footing. While this could have slipped under recent lows, that didn’t happen and it looks like dip buyers are finally warming up to these discounts. This remains a buy above $500.

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Jun 17

Why the indexes keep telling us they want to go higher, not lower. Plus Bitcoin’s next move.

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Thursday turned into another choppy session for the S&P 500 with second thoughts pushing the index back to 4,200 support for the second day in a row.  But just like Wednesday, this follow-on selling stalled and bounced back within hours and the index finished the day right back where it started.

Investors keep fretting over the Fed’s interest rate comments, but as has been the case all year, most owners shrugged at the news and kept holding. And Thursday’s wave of selling didn’t change many minds.

The end result is the index tested 4,200 and bounced off of it for the second time in two days. This is the behavior of a strong market, not a weak one.

That said, a third test of support won’t end as favorably. Fall back under 4,200 so soon after bouncing off of it means the ride is about to get a little bumpier. But just like all of the other dips we came across this year, this is a buying opportunity, not a reason to run for the bomb shelter.

Keep holding for higher prices with stops under 4,200. If prices dip under our stops, get out and be ready to buy the next bounce, something that could happen as soon as a few hours later.

Bitcoin popped above $40k this week after Elon said TSLA would consider taking bitcoin payments for cars again if the cryptocurrency can clean up its carbon footprint. That said, the push above $40k was short-lived and we are back in the upper $30k’s again.

At this point, $40k is the line in the sand. Get back above this key level and we are headed back to $50k. But if we keep hitting our head on $40k resistance, anticipate another retreat back to $30k support.

Anyone that bought the bounce off of $30k support should at least consider taking some partial profits near $40k. It is always easier to buy back in than it is to wish prices higher after missing a good selling opportunity.

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Jun 16

Will this bull market please let us have one big pullback??? Plus, what ZM’s doing out of the spotlight.

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Wednesday was a choppy session for the S&P 500 as the Fed spooked investors with suggestions of higher interest rates by late 2023.

This accelerated the timeline a bit and convinced some people to hit the “sell everything” button. But as has been the case all year, the selling proved to be fleeting and the index bounced off the midday lows.

Should we be worried about higher interest rates 30 months from now? No, probably not. And that’s why the market’s reaction was fairly subdued.

Maybe we are the lobster and the Fed is slowly raising the temperature on us. Or maybe the Fed is the lobster and the economy is slowly raising the temperature on them. Either way, these things are still a long way off, and as nimble traders, we respond to what is directly in front of us.

While I don’t think any of this really matters over the near term. The market has never once cared what I thought. So I erase “what should” from my mind and replace it with “what is”.

If traders shrug off these headlines on Thursday, everything is already forgiven and forgotten and higher we go. But if the selling continues and knocks us under 4,200 support, few things shatter confidence like screens filled with red.

While I don’t expect anything from Wednesday’s headlines, I sure would love to see this turn into full-on panic selling because that creates a far more interesting (and profitable) trade. Unfortunately, I don’t think we’ll get that lucky.

Until further notice, I’m holding for higher prices. A market that refuses to go down will eventually go up…..

The ex-darling ZM has been staging a stealth comeback over the last several weeks. I have been telling premium subscribers to keep an eye on this bounce since reclaiming $300 support and now the stock finds itself 20% higher. And this doesn’t look like this is the end of the run either. Expect this thing to keep chugging back to $400.

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Jun 15

The only way to approach this “do-nothing” market

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis: 

Tuesday was another “do-nothing” session for the S&P 500. The index slipped 0.2% and this continues the trend of inconsequential tenth-of-a-percent moves near record highs.

Two steps forward, one step back. This is a very boring market, but lucky for us, boring is almost always bullish. As long as we keep getting more up than down, everything is going according to plan.

There have been countless economic data points released over the last few months and the market is taking a half-full attitude toward all of them. Fear-mongering is not spooking investors and as long as the government’s free money keeps flowing, expect stocks to continue grinding away at record highs.

While many of these issues (namely inflation) might come back to haunt us, we trade the price action and as long as the market doesn’t care about these things, then we don’t care about them. If something changes, it will show up in the price action and that is when we will reevaluate our outlook. Until then, ignore the chatter.

Complacency often proceeds the fall. The problem with trading this way is periods of complacency last a long, long time. Anyone who sold the absurd complacency at 3,600, 3,800, or 4k is no doubt kicking themselves for being too hasty.

Savvy traders take their cues from the market, not their intuition. While the cynics might eventually be right, they will be wrong for a long, long time before that happens.

High tends to get even higher and that is exactly what is going on here. Keep holding for higher prices until the market gives us a reason not to.

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