Wednesday, July 23, 2014

NASDAQ poised to either break out or stay within its trading range

NASDAQ had a nice little pop on Tuesday and futures are indicating another moderate pop at the open. Quarterly reports are fairly decent overall.
 
NASDAQ is less than 1% below its recent near-term peak, so traders and speculators are itching to find out if NASDAQ can break out to a new short-term peak or stay within its trading range. Flip a coin. I mean, I'm reasonably confident that eventually NASDAQ will break out, but whether it occurs today or tomorrow or next week is subject to market whimsy even though economic and business fundamentals are the primary driver over the long run.
 
Microsoft (MSFT) had mixed results, with better revenues but weaker earnings, so it will be interesting to see how people respond after the open. The stock is poised to pop at the open, but whether people pile on to ride it higher or sell into the rally remains to be seen.
 
Apple (AAPL) will be an interesting case as well. The stock is fairly fully valued, so it is unclear whether people are anxious to ride it higher or not. I'm kind of neutral, but have a reasonable size position, so I'm not anxious to buy more, unless there is a big dip.
 
In short, today people get to put in their two cents (or two thousand dollars) as to whether they are happy with technology stocks or not. We're only part way into Q2 reporting season, but far enough for people to have a rough sense of where we're headed. So, people will be deciding whether to take some money off the table or ride the rally some more. Alas, it has been quite a mixed bag.
 
Xilinx (XLNX) is getting crushed this morning. They are a great company, despite the obvious disappointment. They are on my list of interesting companies, so I will probably pick up a small position here.
 
Yesterday I told a fraction of my Chipotle (CMG) on its big pop and bought some more Netflix (NFLX) on its big dip. I like both companies.
 
I also sold part of my Microsoft (MSFT) holdings yesterday (way overweighted) and bought some short-dated call options to capture any significant pop after the Q2 report. We'll see how that goes today. I have both more cash and exposure to the upside, so it's a low-cost win-win.
 
-- Jack Krupansky

Tuesday, July 22, 2014

NASDAQ to rally on buoyant quarterly reports

A number of companies have reported quite decent results for Q2. NASDAQ has been a bit weak lately, so it's natural for it to rally on occasion, especially when news is good. NASDAQ is still within its recent trading range, so on occasion traders and short-term speculators will attempt to see if the market is ready to break out of that range. NASDAQ is still 1.5% below its recent short-term peak, so it has plenty of room to move before bearish speculators feel an obligation to try to knock it down as a matter of principle.
 
NASDAQ futures are poised for a big pop at the open, but the question remains whether that kicks off a short squeeze and people pile on, or whether people sell into the rally, and whether people buy on any dips.
 
Ukraine and Gaza (and don't forget ISIS and Iraq and Syria!)? They always were just distractions, props used by traders and speculators to distract people from actual underlying economic and business fundamentals. Sure, they'll pop up again at various points in time, but true long-term investors should always ignore such distractions – except to buy on such irrational dips.
 
-- Jack Krupansky

Monday, July 21, 2014

NASDAQ in another trading range

The NASDAQ pop on Friday was great, but it merely balanced out the big decline of Thursday. It was nice to see at least a very modest trend upwards for the full week, but overall NASDAQ is once again locked in a trading range, this time bounded by the most recent near-term peak on July 3rd. Still, NASDAQ remains above the previous near-term peak of March 5th.
 
Trading ranges aren't a lot of fun due to the volatility and lack of a clear trend, but they do present short-term trading opportunities, as well as opportunities to buy on dips.
 
NASDAQ also remains above the weekly close of two weeks ago. The week before last was a down week, and then last week was an up week, which also suggests a trading range.
 
Quarterly reporting season continues, so we will seek plenty of volatility, sometimes due to actual surprises, but more frequently due to either traditional "buy the rumor, sell the news" selling or "sell the rumor, buy the news" buying.
 
Ukraine and Gaza? Personally I don't think either is a truly significant factor here, although traders are notorious for "spinning" negative (and positive) headlines into "narratives" far grander than the actual news itself.
 
I suspect that this week will also show a modest trend higher, but with a lot of volatility between now and 4 PM on Friday.
 
I was late posting today because I had to clean up a mess at the open because I neglected to sell out an in-the-money call option that was expiring on Friday. It "auto-executed" on Saturday, leaving me with a big pile of stock in my retirement account which had no cash to cover that amount of stock, so I had to sell the stock at the open, but the market opened weakly so I had to work a little to get a decent price. This was Autodesk (ADSK), which had a 3.5% jump for the stock on Friday, giving me a one-day gain of 262%. I lost almost half of that gain at the open, but that's life. Fidelity says that I may also get slapped with a trading restriction because of this (auto-execute without enough cash), but it shouldn't affect me too much since I don't normally do that much trading in that account anyway, and I wanted to increase cash reserves in that account as well.
 
-- Jack Krupansky

Friday, July 18, 2014

NASDAQ stuck in trading range, for the moment

With the sharp decline on Thursday, NASDAQ is now firmly stuck in a trading range, well below the recent peak. How long it stays in that range is indeterminate. It may be for the duration of the Q2 reporting season, maybe just a couple of weeks, or the rest of the summer.
 
Hard to say if the jet crash in Ukraine was really the reason for the sell-off, or just a convenient excuse for traditional "buy the rumor, sell the news" for the Q2 reporting season which was always expected to see better reports anyway.
 
A key thing to watch is whether NASDAQ does clearly bounce off the bottom of the trading range, or sets a new short-term low indicating more of a mini-correction. Traders do like to "test support" on occasion to gain confidence about a market before continuing an advance.
 
I used the sell-off to pick up some Google (GOOG) and Workday (WDAY). I sold the rest of my Microsoft (MSFT) call options on the early pop, and replaced them with some short-dated calls that expire shortly after the quarterly report on Tuesday, to capture any further short-term rise in Microsoft with less money at risk. I also picked up a little more Michael Kors (KORS) since it looks like it has been bouncing for the past couple of days, signaling the end of its long decline since its February peak.
 
It's Friday, so short-term speculators will tend to close out positions ahead of a long weekend, when anything can happen. What we don't know if those are net long positions or net short positions, especially after the recent declines and anxiety over Ukraine again, as well as both positive and negative anticipation over the meat of the Q2 reports next week.
 
-- Jack Krupansky

Thursday, July 17, 2014

NASDAQ poised for more volatility, seeking direction

Wednesday was an interesting test for NASDAQ, with a great opportunity for a rally on the back of a strong rise in Intel (INTC), but besides a rally by Microsoft (MSFT), people mostly sold into the rally, cutting two thirds of the initial 30-point pop at the open. Not surprising, but not so pleasant either. This is a mixed bag, with enthusiasm for solid quarterly reports, but generally selling off the broader market.
 
And there is lingering negativity towards social media and other momentum stocks based on comments from Fed Chairperson Yellen on Tuesday about these stocks being overvalued when she said that "Equity valuations of smaller firms as well as social media and biotechnology firms appear to be stretched." Sure, short-term bearish speculators will milk this kind of "news" for all it's worth, but soon enough their own momentum will peter out and we'll see a nice pop in all of them as those bearish speculators take their profits.
 
NASDAQ futures are down moderately sharply, for no specific reason that I can see – it's a fielder's choice for traders to pick their excuse du jour, but overall I think it's a broad "buy the rumor, sell the news" effect based on the widely-held perception that Q2 reports would be relatively decent.
 
I did indeed sell off my short-dated Intel options at the open, for a very nice two-day profit, and decided to buy a smaller long stock position for the long run that was a quarter the size of my original position. So, I'm still in the Intel game, but not overweighted.
 
I also sold off two thirds of my Microsoft call options since the stock had a very nice pop. I'm still way overweight with Microsoft and I also have some call options that position me to capture any further gains, like the pop expected this morning based on big layoffs, but with minimal downside risk.
 
I'm anxiously looking to pick up some Sandisk (SNDK) this morning on its big dip. It's a solid company with great prospects, but... Wall Street traders and speculators don't usually look to the long term. I may buy half my desired position at the open and then the other half this afternoon in case it swoons further, or I may just buy the full position at the open to cut the hassle. It will only be a relatively modest position anyway, so a couple of percent won't make a big difference in my day.
 
-- Jack Krupansky

Wednesday, July 16, 2014

NASDAQ poised for another bounce, but will it hold?

NASDAQ suffered a lot of volatility on Tuesday, but managed to survive with only moderate losses. An encouraging Q2 quarterly report from Intel (INTC) has NASDAQ futures up sharply, poising NASDAQ for a sizeable pop at the open. Now the big question is whether that pop kicks off a significant short squeeze that can last throughout the day and then some, or whether that initial pop peters out. Bearish short-term speculators may try to sell into this rally, or the more moderate bears may "go with the flow" and pile on to the rally, knowing that they can quickly and easily reverse their positions as soon as the rally runs out of steam (again) within a few days.
 
My short-dated Intel call option contracts that I acquired on Monday will present me with an interesting challenge, whether to take my profits at the open, ride them up further over the next couple of days – risking any short-term pullback if the rally loses steam too quickly, or simply exercise them on Friday and maintain a long position in Intel for the longer-term. I have mixed feeling about Intel – I personally like them, but so many investors out there have abandoned them that judging the stock's upside over the next year is rather speculative about investor sentiment, as opposed to their business prospects. I might decide to balance the risk and return, and just take a more modest long position.
 
It is worth noting that Intel is a Dow Industrial component, so the overall market will get dragged up by Intel – and has been for the past nine months.
 
-- Jack Krupansky

Tuesday, July 15, 2014

NASDAQ poised to reclaim its near-term peak

NASDAQ had a nice pop on Monday, although I suspect it was more of a short squeeze than true long-term investors in search of buy and hold. The good news was that it was not a heavy short squeeze, so we don't have a large mob of short-term bearish speculators swarming to pound on the market. If anything, we probably have enough short-term bearish speculators already in the market to fund a bunch more of these mini short squeezes. Short squeezing aside, there did seem to be some enthusiasm on Monday for buying in advance of the coming deluge of Q2 quarterly reports. But, that can be good and bad news. It's great to have enthusiasm, but the "buy the rumor, sell the news" kind of enthusiasm we don't need, unless you are a short-term trader.
 
NASDAQ is just a hair more that 1% below its recent near-term peak. We could see a new peak within a couple of days... or not. We just don't know for sure how the overall market will react to each of the major quarterly reports, whether the good (and bad) news has already been priced in or not, and how much "buy the rumor, sell the news" (or "sell the rumor, buy the news") sentiment is really out there.
 
NASDAQ futures are up moderately again today, suggesting at least a pop at the open, but once again we need to watch and see whether people sell into the rally or pile on, and whether there is any convincing enthusiasm for buying on any dips. Most likely, we will continue to see volatility.
 
Intel (INTC) is reporting after the close, so it will be interesting to see whether people take profits before the close or pile in before the close, and then how people react to the report. I actually sold all of my INTC stock yesterday since I had a significant profit since last fall, but also picked up some cheap call options that expire on Friday just in case there was a pop after the report today. Originally I bought the stock primarily for its dividend yield (3.9%), but with the rally over the past nine months, the yield is less appealing compared to other possibilities, such as the Banco Santander (SAN) that I picked up on the dip last Thursday with the Portugal scare. Depending on how this week plays out for Intel, I may even exercise the call options or buy on any dip. So, I'm covered either way and my profits are protected.
 
I also sold a small chunk of my Facebook (FB) stock that had huge profits over the past two years. I was way overweight on FB and kind of light on cash reserves. I also have some call options, so I'm amply exposed for any additional gains.
 
I'm pondering whether to play my Apple (AAPL) stock the same way. And Microsoft as well.
 
-- Jack Krupansky

Monday, July 14, 2014

NASDAQ poised to jump

NASDAQ had a semi-decent bounce on Friday after the steeper declines earlier in the week, but it is still almost 2% below the recent short-term peak at the close of the previous week. Futures are up this morning, but that may be more of a trader-engineered short squeeze. Some short-term bearish speculators may have been the force behind the bounce on Friday, with buying to cover their short positions ahead of the weekend when anything can happen, but not all short-term speculators do that weekend closeout trade, so the swoon of NASDAQ last week might have left a lot of the short-term bearish speculators too short in a volatile market, and now the upwards pressure of traders could force them to cover their short positions, which is known as a short squeeze.
 
The gains on a short squeeze can be impressive, but aren't typically very sustainable.
 
So, the thing to watch is not how high the market pops on the open, but the pattern of buying throughout the day – is there selling into each rally pop or does the market rise steadily throughout the day. I'd be happier with a modest to moderate 20-point gain, since anything like a 50-point gain or higher would suggest more of an unsustainable short squeeze that would be unlikely to unravel in the coming days or within a week.
 
This bounce could also be symptomatic of a little more "buy the rumor, sell the news" for technology stock quarterly reports that will start flowing in as the week progresses. What we will be looking for there is whether people buy on solid reports, or do the "sell the news" thing.
 
Short-term speculators may have decided that their "risk off" position of last week should now shift to "risk on" as positive Q2 quarterly reports are likely to be filling the media.
 
Or, short-term bearish speculators may have decided to let NASDAQ rise a bit more so that they can get more of a bite on some new short positions. Again, we'll know within a couple of days or a week or so, depending on whether NASDAQ hits a new near-term closing peak above the peak from the week before last.
 
For now, NASDAQ is is fairly decent shape. And the underlying U.S. economy continues to improve (albeit incrementally and with plenty of potholes and fits and starts), which is really the underlying foundation of any sustainable bull market.
 
-- Jack Krupansky

Friday, July 11, 2014

NASDAQ moves on to next stage of testing

NASDAQ actually did quite well for the significant test that occurred on Thursday with trumped-up "concern" about the Fed and Portuguese banks. Even though we were down for the day moderately, we closed well above the low for the day, which occurred at the open, and then NASDAQ rose through the rest of the day. In other words, the initial gap down did not inspire ANY additional selling. Not bad. And that opening low effectively tested support at the old March near-term peak. This is all good news, but that doesn't mean we are out of the woods or done testing. Traders sometimes feel the need to test a couple of times before deciding that support is really holding, especially during lazy slow summer trading, before moving on.
 
NASDAQ futures are up moderately, suggesting a non-trivial pop at the open, but the big question remains whether short-term speculators and traders "sell into any rally" or pile onto the rally, or whether people buy any dips that might occur during the day. And, as always, after that initial reaction, we could see volatility as buying or selling volume peters out and people reverse their bias repeatedly throughout the day.
 
This is a Friday, so technically short-term speculators will tend to close out positions ahead of the weekend when anything can happen, but we don't really know if those positions are net long or short the market, so we could see a nice little rally into the close – or a renewed selloff, with equal probability.
 
The big question going into next week is how urgently traders feel the need to continue testing NASDAQ before throwing in the towel and prepping for the "next leg up" for NASDAQ. We still have 2% to go to regain the closing high from last week, so NASDAQ will be vulnerable to renewed testing until that lost ground can be recovered.
 
I did some dip buying at the open, buying my favorite stocks that had the biggest declines – Banco Santander (SAN), Yelp (YELP), and Solar City (SCTY). All had gains by the end of the day.
 
-- Jack Krupansky

Thursday, July 10, 2014

NASDAQ ready to be tested

The nice recovery bounce on Wednesday was fine, but not conclusive. It may indeed have simply been a dead-cat bounce... or not. It looks like we are about to find out. NASDAQ futures are down very sharply, indicating a significant gap down at the open. Although, honestly, this is much more of a trading setup rather than a move based on economic and business fundamentals. Traders love to make up excuses for their "moves" – in this case purported anxieties about the Fed and Portugal, or something vague like that. I did some reading and neither seems that significant for most U.S. stocks. It honestly doesn't matter. Let them have their gap down at the open. That's a good if not great "test" for NASDAQ. Sure, there may be some piling on for the initial decline, but it remains to be seen how many people will really fall for this gambit vs. buying the dip.
 
With slow summer trading, anything is possible. The initial gap down could turn into a 50, 80, or even 100 point decline, stay flat through the rest of the day, or rise steadily for the rest of the day for only a moderate decline for the day. Anything is possible.
 
As I said, this will be a "test" for NASDAQ, to verify whether the recent advance has "staying power" or was just a temporary thing. In some camps of traders, they feel a moral obligation to engineer these kinds of moves or tests to try to push back down to verify that "support" holds. Fine, let them have their test.
 
Now... to make a short list of stocks to buy on the dip!
 
-- Jack Krupansky

Wednesday, July 09, 2014

NASDAQ doing a little consolidating

Well, that was a decent amount of consolidation for NASDAQ on Tuesday. Whether that's the end of it remains to be seen, but it is actually a good and healthy sign for a market and individual stocks to consolidate after a significant advance. Technical traders (not me!) like to see occasional "testing" like this to see that there is a decent "base" in place. Specifically the dip on Tuesday served the technical trader's adage of "filling the gap" created by the strong open a week ago Tuesday. Now that that gap is "filled", there is one less reason for technical traders to have a negative bias. It is also noteworthy that NASDAQ closed well above its low for the day, which was shortly before noon. IOW, either selling pressure abated and/or a moderate amount of dip buying (that's me!) surfaced. That doesn't mean that we are out of the woods, but simply that there are fewer signs to give technical traders and speculators a strongly negative bias.
 
The Alcoa (AA) was a pleasant surprise, suggesting that the real economy is continuing to improve, which is the ultimate reason for a rising stock market. Although, in truth, the stock market has traditionally been a "barometer", rising or falling well in advance of what average people notice about the overall economy.
 
I still have lingering concern that we could be facing significant "buy the rumor, sell the news" bias related to the Q2 reporting season. Although, with the stiff consolidation of the past two days, that concern is somewhat, but not completely, reduced. Its so difficult to judge what is in the collective heads of short-term speculative market participants these days, especially all these hedge funds with their "hot money" which may stay in place for only weeks or a couple of months and reverse on a dime for no reason apparent to any outsider.
 
There is still the prospect for a correction or at least a mini-correction for NASDAQ, but no overwhelming reason to believe that is either imminent or underway. Despite these speed bumps, NASDAQ will tend to continue to follow the economy higher.
 
NASDAQ futures are up moderately, suggesting a bounce at the open, but that could be the proverbial "dead-cat bounce" ("even a dead cat can bounce"), so the question is whether people pile on any bounce or sell into any rally, and if a dip occurs after the bounce, do people buy the dip or pile on to sell short into the dip. The more likely scenario is just lots of trendless volatility, but given the slow summer trading, we could see either more consolidation or a semi-decent recovery bounce.
 
-- Jack Krupansky

Tuesday, July 08, 2014

NASDAQ poised for volatility

Okay, we finally had a little consolidation for NASDAQ after its recent rally, which is a healthy thing in any case. Now the big question is where to next. NASDAQ could consolidate awhile longer, continue slogging upwards, or reverse and trend downwards, all with equal probability, even if the longer-term trend is still up.
 
The big uncertainty is whether short-term speculators will be taking a "risk on" or "risk off" bias heading into the quarterly reporting season. They may have fueled the recent rally as part of a "buy the rumor and sell the news" strategy, and decide to reverse and bet for the downside now that the news will be taking center stage. Hard to tell – I don't have any inside track on what happens at hedge funds.
 
I'm fairly confident that NASDAQ will be higher come September, but we could also see some serious dips and wild volatility along the way.
 
NASDAQ futures are down modestly this morning, suggesting a dip at the open, but the question is whether people will pile on to push the market down or buy the dip. And if and when there is any dip buying, whether it will quickly peter out and turn into a "sell into any rally" decline. Most likely, we will see a mix of both, with NASDAQ ending moderately up or down by 5 to 25 points. But a big selloff is certainly not out of the question given that we are only one day back from a long holiday week of slow trading. OTOH, if short-term speculators take a "risk on" stance, NASDAQ could set another near-term high.
 
-- Jack Krupansky

Monday, July 07, 2014

NASDAQ needs to consolidate a little

NASDAQ certainly zoomed up last week, but... it was a lazy, slow week, partly due to the summer, but especially due to the looming long holiday weekend. As a result, not everyone was in the market. Now, as people straggle back in from the long holiday weekend, expect some volatility as people decide how to adjust their "risk on" versus "risk off" bias in light of NASDAQ being at a post-March near-term peak. Sure, there is plenty of economic reason for stocks to continue to advance, but the problem is that we don't know how much of the recent advance is short-term speculative "hot money" which can run away just as quickly as it runs into the market.
 
NASDAQ futures are down moderately this morning, suggesting a weak open, but the question is whether people pile onto the decline or buy dips. And if there is a bounce from any dip, do people then pile onto thr rally or sell into any rally. We may just see lots of trendless volatility, but we could see either a sell-off in advance of the upcoming quarterly reporting season, or we could see additional rallying into the same. IOW, no clear short-term trend from here.
 
A little consolidation would make sense here, but markets rarely use sense as their short-term guide.
 
Still, my fundamental guide here is that the economic and business prospects for the U.S. economy are continuing to incrementally improve. The path will be bumpy, but continues to be upwards for the underlying fundamentals. Exactly how the stock market tracks that improvement will vary from day to day, week to week, and month to month.
 
-- Jack Krupansky

Thursday, July 03, 2014

NASDAQ contemplating its future

It was fine to have a little consolidation on Wednesday after NASDAQ finally secured a clean breakout from its former near-term peak in March. Now, the big question is where to next. We could well see a hefty amount of consolidation over the coming couple of weeks, but mixed in with lingering enthusiasm for milking the breakout for all it's worth. In other words, some volatility. It's really mostly a matter of how much pent up bullishness still exists among the short-term speculative crowd, and of course, whether mutual fund and other money managers and retail investors redirect some of the vast amount of sidelined cash into value and momentum stocks.
 
I forgot that this was another holiday week. Friday is a holiday and today has a shortened trading session, so I suspect that any short-term speculators wishing to close out positions ahead of the long holiday weekend probably did so on Wednesday so they could take Thursday off as well.
 
NASDAQ futures are up moderately, but once again the question is whether short-term speculators sell into any rally or buy on dips. And there is still plenty of room for aggressive short-term speculators to engineer impressive short squeezes at any time, forcing the market higher, but not necessarily in a sustainable manner.
 
-- Jack Krupansky