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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 added 0.61% last week and it continues hovering near record highs despite the relentless inflation warnings.
As I’ve been telling readers all along, if the market cared about these things, it would have crashed by now. Everyone has heard these warnings and those that feared them sold a long time ago. Anyone still holding stocks acknowledges these risks and is unlikely to be spooked by recycling the same old headlines.
This stubborn resilience confirms this is a strong marker, not a weak one. As common sense as this sounds, way too many traders fail to grasp the simple concept that a market that refuses to go down will eventually go up.
Bears calling for the “inevitable” breakdown will need to wait a while longer. They’ve been predicting a crash for over a year now, what’s a few more months?
The path of least resistance remains higher. Until further notice, keep holding for higher prices and raising our trailing stops.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Thursday was a bumpy ride for the S&P 500 with the index crashing through 4,200 support at the open and shedding nearly 1%. But as bad as the day started, the selling stalled thirty minutes later and it was all uphill from there.
Headlines again remain benign. The market was initially spooked by unexpectedly low weekly unemployment claims and that stoked inflation worries. But as I’ve been saying for a while, that story has already played out. Most of the people who fear inflation are long gone and were replaced by dip buyers who don’t fear any such thing.
That said, I still think the odds on favorite for killing this bull market is high inflation. But we need more than just early hints of potential inflationary pressures, we need to see the real thing. The boy has cried wolf one too many times and no one is listening to him anymore. Traders need to see the Fed lose control of inflation, not this hypothetical crap. Until then, confident owners will simply ignore the headlines and keep holding.
As much as bears have tried to break this bull market, they cannot get the job done. A market that refuses to go down will eventually go up.
As much as I like the FAANG stocks, NFLX needs to be taken behind the woodshed. I’m not giving up on this company over the long-term, but the stock’s price action is awful and failing to hold $500 support suggests lower prices are ahead. The latest bounce is dead and savvy longs are already out. And not only that, aggressive traders can short this weakness with a stop just above $500.
The other big news is the silliness continues in GME and AMC. As badly as this will end for most people, stupid still has plenty of room to get even stupider. Early breakout buyers can keep holding for higher prices. But if you missed this trade, it’s too late because there is no way to protect your risk at these levels. Move on and look for something else.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished within a whisper of 4,200 for the seventh session in a row. That leaves a lot of people asking if this key level is acting as support or resistance?
Aside from two dips in early May, the index has been stuck on 4,200 since mid-April. That’s a month and a half of almost zero headway in either direction, equally frustrating both bulls and bears.
While holding near the highs is almost always a good sign, there comes a point when resilience starts looking more like stalling. Have we reached that tipping point? Not yet…but it is approaching quickly.
As is normally the case, there are two ways this plays out. Either prices continue higher or they stall and reverse.
In these cases, we always give the benefit of doubt to the trend. This is a bull market and that means 9 times out of 10, these things resolve to the upside. If a person likes betting on the higher probability outcome, they are trading this from the long side.
While holding here covers the long side, there is still that 1 out of 10. That’s what our stops are for. Pick a level where you will admit defeat and pull the plug. If the market stays above this level, keep holding. If it slips under, get out and try again next time.
Personally, I like keeping my stops nearby. That allows me to get out early and be in the best position possible to buy the next bounce. But a nearby stop also increases the likelihood of a false alarm. Fortunately, there is an easy fix for that too. As soon as I get out, I’m already looking for the next entry point, even if it comes a few hours later.
Most likely this consolidation will resolve to the upside. But if it dips and forces us out, be on the lookout for the next buyable bounce. And despite what the cynics claim, the least likely outcome is the demise of this bull market. They’ve been wrong for twelve months and they are most likely wrong here too.
TL;DR: Keep holding for higher prices with nearby stops and be ready to get back if a dip pushes us out.
Yesterday I said AMC’s latest breakout was buyable and a few hours later the stock doubles. While I’d love to say I predicted this, I doubt anyone who has been doing this for a while would be bold enough to predict a 100% move over a few short hours.
That said, this had all the right ingredients, namely a stupid following that is prone to getting even stupider.
While holding these irrational moves is great, don’t fall for the hype. This is a trade, not an investment. Stay near the exits and be ready to lock in some heady profits as soon as the cracks start showing. Those that get greedy and hold too long will end up giving everything back and then some.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Tuesday morning saw a good open turn sour. The S&P 500 pushed to within a whisper of record highs in early trade, but it was all downhill from there. Within an hour, the index retreated more than 30-points and was retesting 4,200 support. But just when things looked their most dire, supply dried up and the market traded sideways the rest of the day, ending two points above this key psychological level.
There were not any new headlines driving this selling and instead, this was simply another flareup of second-guessing over inflation worries.
Indecision and fear of heights is a normal part of every move higher and this rally is no different. But the thing to remember is we’ve been living under these clouds for nearly two months. If they were going to smother this bull market, it would have happened by now. Instead, this is little more than a purge of nervous owners and is replacing these weak sellers with confident buyers who are comfortable holding these risks.
If the first few bouts of indecision couldn’t kill this rally, the third and fourth attempts are even less likely to succeed.
That said, we could still see a dip back to 4k support before this is all said and done. But until something new and unexpected comes along, treat every dip as a buying opportunity.
The meme stocks are making a comeback. GME broke through $200 resistance last week and as I wrote then, this breakout is buyable for the most nimble and risk-tolerant traders. This is trading well and still holdable, but be ready to lock in profits at a moment’s notice because these gains will disappear even quicker than they came.
AMC secured some financing and it looks like it will survive Covid. No doubt investors are happy to see this company on solid financial footing. That said, the stock is trading near record highs. To say this company is in the best shape of its life overlooks a lot of dark clouds hanging over it. Namely the relentless shift to video on demand with many studios now streaming moves simultaneously with their theatrical release.
AMC is a buy for the moment because something that is high tends to get even higher. But never forget, this is a trade, not an investment. Let someone else get stuck holding the bag. Keep holding for higher prices, but be ready to pull the plug as soon as this turns south.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished Thursday 0.88 points above the psychologically significant 4,200. Friday it bested this key level by 4.11.
As trivial as these gains seem, the most important thing is we continue holding near record highs. Markets collapse from unsustainable levels quickly. Holding here all week confirms there is meaningful demand at these levels. As I often write, a market that refuses to go down will eventually go up.
While counting profits as the index races higher is more fun, sideways grinds are a normal and healthy part of every sustainable rally. And you know what, so are dips. Nothing ever goes straight up and that includes this stubbornly resilient bull market.
Looking back at recent history, it took us three months to go from 3,600 to clearing 3,800. There was another three months between 3,800 and the 4k breakout. And counting back from today, we are about two months into the current 4k breakout. If history repeats itself a third time, we should be prepared to wait for another month before finally leaving 4,200 behind.
The index is acting well, but we need to keep our expectations in check and that means being patient a little longer.
Bitcoin slipped back into the mid-$30k’s after flirting with $40k resistance over the last few days. It’s been a rough few weeks as the cryptocurrency shed nearly 50% of its value after Elon Musk renigged on his promise to accept bitcoin at TSLA.
While the $30k bounce was buyable, we really need to see this reclaim $40k support to help put investors at ease. If we cannot get there, a test of $20k support becomes increasingly likely.
If a person bought the $30k bounce, you can keep holding. But if a person is still in cash, wait for a second bounce off of $30k or hold off on buying until this reclaims $40k. Buying anything in the mid-$30k’s is no man’s land and leaves us vulnerable to near-term losses. And if this falls under $30k all bets are off and it is time to abandon ship because this could fall another 30% before finding support at $20k.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 finished Thursday up a fairly trivial 0.12%. That said, it was enough to let the index close above the psychologically significant 4,200, if only by 0.88 points.
Does 4,200 really matter? While round numbers always sound nice, in reality, this is just another level and is no different than 4,199 or 4,198. More important than some number that ends in a double zero, now we can move on. From here, 4,200 simply turns into another minor milestone disappearing in the bull market’s rearview mirror.
Inflation worries are gone for now, but no doubt they will be back. And inflation might even cause the demise of this bull market. But that’s an issue for another day. Until then, we trade what’s right in front of us and that is riding the rally higher. With 4,200 down, the next stop is all-time highs.
As I often say, a market that refuses to go down will eventually go up.
FB is on fire and closed at all-time highs. So much for the post-election drama hanging over this stock.
And you know what? Stocks that are high tend to get even higher. No reason to give up on what has been working. Keep holding for higher prices and lifting our stops.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
Another day, another finish short of 4,200. As well as the index has been trading, it sure is having a heck of a time getting above this psychologically significant level.
As I wrote subscribers earlier today:
Stalling before the fall? Or pause before the next rally?
While both scenarios could easily play out, until proven otherwise, we continue giving the benefit of the doubt to the rally. Holding near the highs is a sign of strength, not weakness. While I would get concerned if we cannot get above 4,200 over the next few weeks, pausing at these levels for a handful of days is a very normal and healthy thing to do.
More important than the lack of follow-on buying is the absence of contageous herd selling every time stocks dip. The market is acting well and the path of least resistance remains higher.
GME smashed through $200 resistance Tuesday afternoon and that surge of buying continued Wednesday. This breakout is very much buyable, but a person has to have an iron stomach, be incredibly nimble, and view this as a very short-term trade. Take profits early and often because they won’t last long.
As I wrote previously:
Tuesday was that day and now we’re sitting on 20% profits. Not bad for a few hours of “work”. But don’t get complacent, this thing falls even faster than it climbs. Be ready to take profits at the first hints of trouble and no matter what, do NOT let this trade slip into the red. This could be the last time this stock gets to these levels.
Profit from the hysteria, but don’t fall for the hype.
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What’s a good trade worth to you?
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For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
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