Tuesday, September 02, 2014

NASDAQ poised to drift a little higher

NASDAQ closed out the summer with a decent gain for the month of August, but now that we are past the Labor Day break it will be a whole new ball game. It may take a few days or even a week or two for the "big hitters" to get back in the saddle and clearly set their sights, so we may drift a little on cruise control before the market sets a more deliberate longer term trend.
Futures are up, indicating a little pop at the open, but the question is whether people will pile on to that rally or sell into it, and whether they reliably buy on any dips that occur during the day.
People are still struggling to settle on a comfortable "narrative" for how things will play out when the Fed officially ends its QE buying program in October, but I'm feeling that overall it will be kind of a wash by the time we get further into November. The pace of the real U.S. economy will be far more important, and currently that continues to be an incremental upwards trend, with no clear end in sight, albeit with plenty of potholes along the way.
Geopolitical concerns? Just noise that traders will use as cover for any consolidation they may want to periodically perform.
-- Jack Krupansky

Friday, August 29, 2014

NASDAQ set to stabilize after a little breather

NASDAQ did indeed have a little breather over the past two days, and did so without incurring any significant damage. That's a good sign, but... the danger at this stage is that buying enthusiasm may have completely dried up, so NASDAQ could be poised for a bear attack, especially after all the heavy hitters get back to their desks next week after the long Labor Day weekend and even longer summer break.
NASDAQ futures are up modestly, suggest a nice recovery bounce after the little breather, but the open question is whether people pile on to that rally or sell into it, and whether there is any significant enthusiasm for buying any dips during the day.
Today is a Friday before a long, holiday weekend, so short-term market participants will tend to lighten up or even close positions ahead of the weekend, when anything can happen (Ukraine?). That's a net lightening, but we don't know if these short-term market participants have been net long or short during the week. So we could see a little consolidation as bulls lighten up, or... a little rally if bears are lightening up by buying to cover short positions.
-- Jack Krupansky

Thursday, August 28, 2014

NASDAQ set to extend its breather... or not

NASDAQ did indeed take a little breather yesterday after all its recent rallying. No big surprise there. Based on a dip in NASDAQ futures this morning, it looks like NASDAQ is poised to extend that breather and maybe even do some more serious "consolidation"... or not. It all depends on the net posture of speculators and whether they are more inclined to pile on to some dip at the open or... buy any dip.
The chatter about Ukraine is just noise used by traders as "cover" for their underlying sentiment which is simply that NASDAQ is due for a breather anyway. A breather simply means that buying (or selling) volume has petered out and traders are waiting for the market to reestablish some direction. Traders don't make as much money with a stagnant market, so if buying dries up, their inclination is to reverse their bias and sell.
The economic news was good this morning, with Q2 GDP reported higher and jobless claims falling further. But, good economic news isn't a one-way positive for the market. On the plus side it underpins stronger financial performance for companies in the months and quarters ahead, which is good for stocks. But on the minus side it increases the possibility of the Fed raising interest rates sooner and faster, which could put a bit of a damper on stock trading. To me, it's all a net positive, but perma-bears always see the glass as half empty. Any Fed action on rates is still quite a few months in the future.
-- Jack Krupansky

Wednesday, August 27, 2014

NASDAQ poised to take a breather... or not

This nice NASDAQ rally really is starting to look "long in tooth" and in need of a little breather and possibly some consolidation, but... that is not to say that this is what will actually happen. We simply don't know what fraction of the bulls are now tapped out versus standing by with more capital to deploy. But we do know that the bears are desperately ready to clobber the bull the moment that buying pressure dries up. But the flip side of that flip side is that any half-hearted move by the bears can quickly evaporate as well and turn into another short squeeze that kicks off another rally higher.
NASDAQ futures are up very modestly, so we should see a very modest pop at the open, but the big question remains whether people pile on to build on the rally or turn around and sell into the rally. Both prospects are equally likely.
Once again, all of this is happening in the context of the slow trading of the summer doldrums. Labor Day is next Monday, so we are just three trading sessions away from the heavy hitters getting back from their summer breaks. It may take them a week or so to get their act together, but by the middle of September we will have a much better handle on whether this "nice" rally has both staying power and "legs" for a further advance, especially for heading into October when the Fed officially ends its QE asset purchase program.
As long as the real economy continues to incrementally improve, which it has every prospect of doing, the stock market will continue to be well-supported, albeit with potholes, mini-corrections, and even outright corrections along the way. Call it "upwards, but bumpy."
-- Jack Krupansky

Tuesday, August 26, 2014

NASDAQ set to pause as it seeks direction

This recent NASDAQ rallying is quite impressive, if not for the fact that it is occurring in the context of the slow trading of the summer doldrums. We saw a nice pop at the open yesterday, but there was a moderate amount of selling into that rally, so not all of it stuck at the close. Still, it is heartening that there wasn't more selling.
NASDAQ futures are up moderately, suggesting a modest pop at the open, but once again the big question is whether people pile on and pump up that rally, or sell into the pop and bet on some consolidation. At this stage, a lot of the rally over the past week has probably spent itself, so consolidation is more likely than any big surge upwards. Besides, the bears who got clobbered by recent short squeezes are just itching for some payback.
Once again, all of this nominal market movement during the slow trading of the summer doldrums will be subject to heavy review and revision once the heavy hitters get back to their desks from their relaxing summer breaks... in just one week from today. Get ready!
That said, the underlying U.S. economy continues to incrementally gather steam, putting more people back to work and continuing business investment, all of which constitutes a "rising tide" underpinning the stock market. And don't worry about the Fed "taking away the punch bowl" – interest rates will remain quite low for an extended period of time.
-- Jack Krupansky

Monday, August 25, 2014

NASDAQ set to try for a new leg higher

NASDAQ managed to preserve its breakout from its trading range last week, and now is poised to try for a new leg higher. It's doable, but whether it is sustainable is an open question.
NASDAQ futures are up strongly, suggesting a nice pop at the open, but the big question is whether people sell into that rally or pile on and kick off yet another significant short squeeze.
The real open question is how many bullish speculators still have uninvested cash and whether they are prepared to go to a more aggressive "risk on" posture from their current posture. If not, this new leg will peter out and reverse in relatively short order. But if they do take a more aggressive "risk on" posture, watch out as NASDAQ soars again.
Once again, I have to caution that all of this is happening in the context of the slow trading of the summer doldrums, so even if we do continue to set fresh near-term highs for NASDAQ, all bets are off with respect to how the "heavy hitters" respond after Labor Day when they get back to their desks from their summer break. And the impact, if any, of the Fed finishing their QE purchases in October is also a looming uncertainty. But, as they say, "a bull market climbs a wall of worry."
-- Jack Krupansky

Friday, August 22, 2014

NASDAQ searching for direction, again

Well, NASDAQ survived a third test of the durability of the breakout from its trading range and passed without too much effort. That doesn't mean that we are out of the woods, but it is a positive sign. The bad news is that upwards momentum has evaporated, so now NASDAQ is a sitting duck target for the bears. The flip side is that the bulls are just waiting for the bears to just try and make a move, and then they can come in and clobber them again. But, that works both ways, so it's sort of a stalemate. So, NASDAQ has to wait them out until somebody moves with more conviction.
It's yet another Friday, so short-term speculators will tend to exit their positions ahead of a summer weekend when anything can happen. Whether that exit, by both bulls and bears, is a net positive or negative is of course unknown.
NASDAQ futures are down slightly, suggesting a little consolidation at the open. Whether that lack of upwards momentum inspires a round of selling or whether it inspires a round of dip buying remains to be seen.
Some consolidation is still in the cards, but not a pure slam dunk. Volatility and drifting are the default for the slow trading of the summer doldrums. But if the bears get too aggressive, the bulls will be only too willing to hit them hard and kick off yet another short squeeze rally, which will only attract even more retail investors and money managers into the market who are increasingly worried that they are missing a train that has already left the station.
-- Jack Krupansky

Thursday, August 21, 2014

NASDAQ set for another test of the durability of the breakout

NASDAQ managed to survive Wednesday with only minimal damage to the breakout. It was a very slight decline, although a lot of momentum stocks (like in my portfolio!) did see some significant erosion, which is typical if the market is not advancing reasonably strongly. The big question is whether Wednesday was just a little consolidation, a one-day thing, or a sign that buying enthusiasm has peaked and is evaporating at a rapid pace. But, either way, we could see further consolidation, even if the advance does resume after a little breather.
NASDAQ futures are up modestly, suggesting that traders think yesterday was in fact just a needed breather, and that they are willing to give the market another shot. But... another shot does not necessarily mean that people have a lot of conviction that a sustained advance is a slam dunk at this stage. That said, this kind of half-hearted, soul-searching posturing is actually quite typical for any decent advance.
The big question remains whether people pile on to any rally at the open, or resume selling into any rallies, and how much buying pressure, if any, comes out of the woodwork on any dips.
As previously noted, we're still stuck in the summer doldrums of slow trading through Labor Day, so any moves that occur in the next couple of weeks will be subject to significant "revision" once the "heavy hitters" get back from their summer break.
-- Jack Krupansky

Wednesday, August 20, 2014

NASDAQ set for another test of durability of the breakout

NASDAQ managed to survive its first test yesterday, preserving the breakout from its trading range, and then some. It's still too early to call it a clean new leg of the advance, but yesterday was a good sign. Today will be another test of the durability of this breakout. We could see a little consolidation at this stage as well; markets rarely move in straight lines for very long.
Futures are up modestly, suggesting a modest pop at the open, but the big question remains whether people will pile on to the rally or start selling into it.
The bears have been held at bay for a number of days now, but sooner or later the buying pressure will dwindle and even evaporate, and that's when the more patient bears will pounce and traders will reverse their bias to "risk off." Whether that happens today, this week, next week, or next month remains to be seen, as does the response of more bullish speculators and investors who are also patiently waiting with their money on the sidelines for a more clear and convincing sign that the market is solid enough for them to take a more definitive "risk on" posture.
And all of this is occurring in the context of the summer doldrums of slow trading, so regardless of where we end up come Labor Day, it will be a whole new ballgame once the "serious hitters" get back from their extended summer vacations.
Meanwhile the underlying U.S. economy continues to incrementally improve, albeit in a somewhat sluggish and bumpy manner, which will continue to support an incrementally advancing stock market. Sure, we will need to exercise caution if the market "gets too far ahead of itself", but given the performance of the market year to date, that doesn't seem to be an imminent problem at all.
I will continue to incrementally take some profits to raise my cash reserves so that I can buy on any significant dips.
-- Jack Krupansky

Tuesday, August 19, 2014

NASDAQ set to test whether the new near-term peak holds

Okay, NASDAQ actually did manage to break out relatively cleanly from its trading range and set a new near-term high, 22 points above the old near-term peak on July 3, 2014. That doesn't mean the coast is clear for the next leg up. In fact, the next task for traders and short-term speculators is to "test" the durability of this new near-term high.
NASDAQ futures are up modestly, suggesting that traders are willing to bet on further gains, but the big question is whether people continue to pile on to the rally at the open, or whether they sell into any rallies and bet or at least presume that the next move is more corrective.
I'm sure the bears are chomping at the bit to sink their teeth into this market, but they just got burned badly, so they may decide to wait a bit longer before diving back in to get a better (higher) entry price for fresh short positions. On the flip side, more bullish speculators may be more than happy to extend themselves to take advantage of a short-term lull in the bearish "risk off" bias.
And the usual caveat – all of this is happening in the summer doldrums of slow trading, so expect volatility and wait until after Labor Day for the "full team" to weigh in and cast their votes as to what is the more sustainable trend.
-- Jack Krupansky

Monday, August 18, 2014

NASDAQ set to take another shot at breaking out of its trading range

NASDAQ opened with a solid run at the upper edge of its recent trading range on Friday, but fell a bit short, like less that 5 points, and then wavered a bit before throwing in the towel. People blamed news from Ukraine for the intra-day sell-off, but that was just traders using a little non-news as a cover for their underlying intentions. As it turned out (with no new news), NASDAQ bounced back and scored a modest rise for the day. It was disappointing that the breakout run failed, and that is a yellow flag here, but none of this is necessarily definitive given that here we are in the summer doldrums of late summer slow trading.
Friday's trading pattern is also consistent with the trader's model of "filling the gap", where traders believe that trading must eventually trade back down to "fill" any "gap" left by a big rise (or fall) at the open. Trader's managed to do exactly that, which then opened the door for the bounce and moderate gain for the day. In that sense, this was a bullish signal.
The main yellow flag from Friday is that people didn't pile on to the pop at the open. There was a little bit of selling into that rally. People did try a couple of more times to rally for that last 5 points to a new high above the July near-term peak of 4,485, but ran into significant resistance. Not a good sign. So, we have mixed signals.
NASDAQ futures are once again up moderately strongly this morning, indicating a significant pop at the open. Once again, the big question is whether people will pile on to that opening rally and kick off a significant short squeeze and push NASDAQ up the 21 points needed to set a new near-term peak, or whether people will mostly just sell into the rally. And even if a new near-term peak is reached, will it hold and extend those gains. If not, we could be setting up for a "double top", which is a more bearish sign and the prelude to trading back down towards the bottom of the trading range again.
As I said, none of this is really definitive during the slow summer doldrums trading. Regardless of where we end up come Labor Day, the market will "adjust" by the end of September as the bulk of traders and speculators get back to their desks after a lazy summer and start placing bigger bets on whatever trend they think is emerging. The big question is whether they will be taking more of a "risk on" or "risk off" posture, especially going into October when the Fed will officially end its QE2 buying program. That could cause some significant volatility, but I suspect that it will all be a wash come November, when people will resume placing bets on the actual underlying U.S. economy, which continues to incrementally improve.
Some people continue to express great anxiety that the Fed will aggressively raise interest rates in 2015, but there is no sign or even chatter of that possibility coming from the Fed itself.
-- Jack Krupansky

Friday, August 15, 2014

NASDAQ poise to test and try for a breakout from trading range

The modest gain for NASDAQ on Thursday was quite welcome, and now positions the index barely 0.75% below the upper edge of its trading range, as defined by the near-term peak in early July. NASDAQ futures are up moderately, suggesting that traders think there is a chance that bullish speculators may make a run for a breakout above that July peak. That would also be predicated on a healthy pop caused by a short squeeze.
Even if NASDAQ does technically break out above the trading range, the big question is whether it is sustainable, or whether it simply gives bearish speculators a more attractive entry point for another run back down in the trading range.
And once again the main thing to look for is whether people pile on to any pop at the open or instead sell into any rally.
It's another Friday before a weekend during the summer doldrums, so short-term speculators can be expected to take at least some of their money off the table in advance of the weekend when anything can happen. Whether the net difference between the bullish and bearish speculators is positive or negative remains to be seen. I would simply note that the bears may opt to let the bulls have their one day in the sunshine, and then regather in force and pounce harshly again early next week.
Meanwhile, the real economy here in the U.S. continues to incrementally improve, which will continue to auger well for the stock market. We still have a long way to go before we are finally back to a fully productive economic state. Maybe another two years or so. Sure, the cynics will fuss about the Fed with wild speculation, but the Fed is focused on making sure that the recovery of the economy completes. IOW, the moderates are in control of the Fed right now, not the cynical hawks.
-- Jack Krupansky

Thursday, August 14, 2014

NASDAQ ponders its next move within trading range

NASDAQ had a nice gain on Wednesday, but it may have been in large part a short squeeze, so retaining all of those gains may be difficult. Speculators are likely split between those betting on a bullish move and those betting on a corrective move. How those two camps net out remains to be seen. It all depends on who has more available cash that they are ready and willing to bet on their bias right now. So the trading range continues, with NASDAQ stuck between the March and July peaks. A lot of that is due to the summer doldrums with their characteristically slow trading, but this kind of tentative, uncertain advance is not atypical in even the best of markets.
NASDAQ futures are up a little, suggesting a modest pop at the open, but the question remains whether people will pile on to the pop or sell into any rallying as the day progresses.
A little consolidation would be par for the course at this stage, but I also wouldn't be surprised if we see another round of short covering due to too many speculators taking a too skeptical position on the health of the market.
I sold extra positions on Amazon (AMZN) and Yelp (YELP) that I had taken recently on irrational dips since they achieved my goal of a 5% gain from the dip. I retain long-term buy and hold positions on these stocks though. The cash proceeds are now ready for the next round of irrational dips that Wall Street likes to hand me on a silver platter. Thank you, Wall Street! Really.
-- Jack Krupansky

Wednesday, August 13, 2014

NASDAQ set for a short squeeze

Tuesday wasn't a great day for NASDAQ, but it did prove that the current trading range trend is reasonably resilient. It would have been so easy for short-term speculators to push NASDAQ below support, but... they failed and NASDAQ recovered from a steeper intra-day loss. Now that NASDAQ has proved its staying power for the bottom of the trading range, traders are grinning because they know that the more bearish speculators are probably over-extended and that a little pressure will get them to abandon their short positions in a process known as a short squeeze. Get a few bears to jump ship and that will fuel a rise that in turn incites more short covering, and so on in a virtuous cycle, until all the weaker short sellers have been forced to cover their short positions by buying back the shares that they had shorted.  The flip side is that those disgruntled bears will sit patiently and wait for NASDAQ to become a little over-extended higher up in this trading range and then pounce again.
NASDAQ will likely stay in this trading range for the rest of the summer, although there is a distinct possibility of breaking out modestly to a slightly higher near-term peak.
I bought a little more Tableau (DATA) and Solar City (SCTY) on the dip yesterday.
-- Jack Krupansky