Friday, August 01, 2014

NASDAQ poised to test lower edge of its trading range

Wow, that was impressive – as I suggested early yesterday, the failure of NASDAQ to achieve a breakout on Wednesday left traders more inclined for consolidation within the trading range, and we got that, in spades. We even came close to testing the lower edge of the trading range as well (the March peak), but not quite. Today, traders may use the disappointment of yesterday's decline to take a shot at that lower edge again, but... since they failed yesterday when pessimism was at a climax, their odds of success are greatly diminished.
 
Again, it may also have been a combination of slow summer trading, people wanting to cut out early on Friday and dumping positions on Thursday, or even option expiration today.
 
I wouldn't read too much, if anything, into the steep decline on Thursday, other than that yes these kinds of dips can occur even in the most bullish of markets. And we're in a trading range here, so the rules of a trading range trump any underlying longer-term bullishness.
 
We may or may not see a dip at the open to "test" the lower edge of the trading range. If we do see a dip, the big question is whether people buy the dip and we reverse and start trading upwards within the trading range again. Or, if people pile on to the dip, we could see a true "breakdown" and head into another mini-correction. Given that this is a slow Friday in a slow summer, I wouldn't draw any immediate conclusion even if we do close modestly below the March peak. The action on Monday and Tuesday will be more telling, when people get back from their summer weekend.
 
As far as GDP, average the Q1 and Q2 reports to get a better view of where we are, so averaging 4.0 and minus 2.1, gives us about 1%. I expect that Q3 will probably be about 2% or so. Yes, the economy is still plodding along, neither booming nor busting. We are still in the recovery phase after the recession, and will be for at least another year if not two. So, there is no need to worry that the Fed is going to dramatically raise rates over the coming year.
 
 
I bought a little more LinkedIn (LNKD) and Tesla (TSLA) just before the close. It will be interesting to see how they play out. My goal for those two positions is simply a 5% pop. I have longer-term positions in both that I will stick with no matter what.
 
I also picked up an extra position of Amazon (AMZN). Wall Street has a hot/cold attitude toward them, but I have great confidence in their longer-term business prospects.
 
And I picked up an extra position of Yelp (YELP) as well in its post-report dip. And 3D Systems (DDD) as well. I really like these dips.
 
-- Jack Krupansky

Thursday, July 31, 2014

NASDAQ poised to consolidate in its trading range

NASDAQ was poised to break out to a new near-term peak yesterday, but... "poised" is not a measure of certainty. It did pop very nicely at the open, but too many people took a "sell into any rally" bias and a significant portion of that opening pop was lost. An attempt to rally again later in the day failed to set a high for the day, which is always the signal that the rally is failing. Sure, we did manage to see a nice gain for the day, but it just didn't have the feeling of any real enthusiasm.
 
BTW, I was one of those people selling into rallies, but I am still overweight on a lot of these stocks. I had a lot of "extra" positions that I had bought on dips which had hit 5% or more gains, so they had served their purpose. I now have semi-decent cash reserves to get back to buying on dips.
 
NASDAQ futures are down sharply, on no particularly significant news. I wouldn't say that Argentina or Greenspan are great reasons for a significant pullback this morning. Rather, I think the failure of NASDAQ to break out yesterday is all the incentive that traders need to consolidate and test to see if NASDAQ is ready to trade back down deeper into its trading range.
 
And I'm sure that some people just want to close out positions so they can take it easy on Friday and head off for the weekend early.
 
There are also some option expirations occurring that can boost volatility.
 
That said, this will be a test – to see if people really are ready to reverse their bias and sell the market lower, or... maybe they will prove the traders wrong and buy into the dip. And then the big question is whether people pile on to any intra-day recovery rally or sell into it.
 
In any case, this is all "trading range" behavior, typical of slow summer trading.
 
Some people are also worried that a stronger economy means that the Fed will be tightening credit too severely too soon, which they fear will cause a major stock market correction. I'm not one of them, but I recognize that these people do exist and that their negative psychology may have an impact on the market. But anything that causes the stock market to rise at a more measured pace, albeit with significant volatility, is actually a good thing.
 
I'm not sure how I will play LinkedIn (LNKD) and Tesla (TSLA) into their reports after the close. I'm still overweight on both, even though I sold some extra dip purchases yesterday and last week to protect my nice gains. I'll wait to see how the stocks trade into the close. I don't plan to sell any more, but if either dips significantly into the close, I will consider buying an "extra" position. And I would certainly buy any big dips tomorrow.
 
I sold my "extra" position of Yelp (YELP) to protect a 7% gain. But now, I may buy it back if there is a deep enough dip. I'm not too overweight on it.
 
I sold more of my Facebook (FB) since I am still way overweight and I'm not sure it will rise too far from here before it dips again. I'd rather have a little cash for dip buys.
 
Ditto for Twitter (TWTR). It is a long-term holding for me, but I have to protect some of my profits as well as being prepared to take advantage of the frequent seemingly irrational dips.
 
-- Jack Krupansky

Wednesday, July 30, 2014

NASDAQ poised for possible breakout, again

NASDAQ held up fairly well yesterday despite a determined effort to sell it off, so it looks like traders are using that as an excuse and foundation for taking another shot at breaking out to a new near-term peak. A solid Q2 GDP report and promising ADP employment report are just the kinds of catalysts to inspire the kind of short-covering short squeeze to boost NASDAQ by the 1% gain it needs to leap above the near-term leak at the beginning of July.
 
A new peak is within reach, but sustaining that kind of gain is still an open question. I'm optimistic, but I'm a pragmatist as well.
 
The Twitter (TWTR) Q2 report is a catalyst as well. Technically, we should note that TWTR is not a NASDAQ stock – it is listed on the New York Stock Exchange, but it could help lift other technology stocks anyway.
 
I'll be selling a fraction of my TWTR holdings on the big pop at the open. I'm into TWTR for the long run, but I'm already overweight on it. And I did buy some short-dated options yesterday just before the close, as well.
 
-- Jack Krupansky

Tuesday, July 29, 2014

NASDAAQ poised for a modest recovery bounce, but still stuck in a trading range

The bad news is that NASDAQ was down again yesterday, but the good news is how well it recovered from a fairly steep decline earlier in the day. That suggests that we're not in anything close to a "bear market". Rather, this is simply the trendless volatility of a trading range.
 
NASDAQ futures are up modestly, suggesting a recovery bounce at the open. The question is whether people pile on to that bounce to kick off a moderate short squeeze, or sell into the rally to push further down in the trading range. And whether people buy any dips and how aggressively they sell into any further bounces
 
There is no real fundamental reason for the markets to exert a strong trend here, so mostly we will be looking at the natural volatility of a traditional slow summer trading season.
 
We do have the Q2 GDP report coming up tomorrow and monthly employment report on Friday, so we could see some buying or selling "on the rumor" going into those reports and then the reverse once each of those reports are out.
 
At this stage, I would expect that traders would be more likely to try to test the lower edge of the trading range than to take another shot at the upper edge, but all too frequently the actual market move is against the consensus since smarter, deeper pockets wait to see how dumb money bets and then bets bigger in the opposite direction. In other words, being nimble works better.
 
-- Jack Krupansky

Monday, July 28, 2014

NASDAQ stuck in trading range, seeking direction

NASDAQ no longer has a clear short-term trend – it' stuck in a trading range and seeking a direction. Absent any clear guidance on direction, volatility will continue, and NASDAQ will continue to bounce up and down in the trading range, not setting a new short-term low below the March 5th peak, nor a new short-term peak above the July 3rd peak. The preliminary meat of the Q2 reporting season is behind us, so major surprises or enthusiasm will be more muted for the coming weeks. And August is typically a slow, summer, vacation period anyway.
 
That said, it is still quite possible for NASDAQ to rally 1% to set a new short-term peak, but whether even that would be a true breakout would be dubious absent some significant pickup in trading volume. And any peak set during the summer would surely be "challenged" when more serious trading resumes after Labor Day.
 
NASDAQ futures are relatively flat, indicated confusion about whether NASDAQ will head up or down for the next couple of days.
 
I'll be looking to raise more cash reserves, as well as selectively looking for major dips of individual stocks to buy.
 
-- Jack Krupansky

Friday, July 25, 2014

NASDAQ poised to trade back down in its trading range

NASDAQ came within a point of touching its recent short-term peak, but close is not good enough, so enthusiasm for a breakout evaporated. Today, disappointment with Amazon is the excuse du jour to reverse and trade back down in the recent trading range. Futures indicate a moderately sharp pullback for the market at the open, but... it remains to be seen if people really do pile on on the short side, or whether they buy on the dip, and then to see if they in turn sell into any recovery rallies during the day. NASDAQ actually could rally to a breakout today as the day wears on, but then again it is a Friday, so short-term speculators will tend to close out positions ahead of the weekend when anything can happen.
 
I'm happy with Amazon, and glad to see them doing very heavy investment to remain a true industry leader. Sure, I do wish they "communicated" better with Wall Street analysts, but that's a rather hopeless task anyway. I'm actually thrilled when companies thumb their noses at Wall Street – it may cause short-term pain, but Wall Street always gets over the pain, and long-term money managers, as opposed to traders and short-term speculators, always manage to sniff out great businesses.
 
I'll be buying the dips for Amazon (AMZN), Pandora (P), and Starbux (SBUX).
 
I took some profits on Facebook (FB) and Under Amour (UA), and picked up some Qualcomm (QCOM) and TripAdvisor (TRIP) on their dips. And some cheap McDonalds (MCD) call options as well.
 
-- Jack Krupansky

Thursday, July 24, 2014

NASDAQ remains posied for a breakout or stuck in a trading range

After a nice two-day advance, NASDAQ remains poised to set a new near term peak, little more than 12 points below the near-term peak on July 3rd. Close... but yet so far away. It could indeed happen, but sometimes there just isn't enough actual momentum, and what traders call "resistance". NASDAQ could also simply be nearing the upper edge of a trading range and actually be poised for a reversal. Even if NASDAQ does technically rally above and even close above the recent near-term peak, the question will remain whether it did so with enough conviction to sustain an ongoing rally as opposed to climaxing and then withdrawing.
 
NASDAQ futures are up enough to pop above that near-term peak at the open, but the question remains whether people will pile onto that rally or sell into that rally. And then whether they will buy on dips or pile on to them on the short side.
 
Facebook (FB) had very decent quarterly results. It's my largest holding, so I may sell a little more on the pop. I also hold call options which I may sell to lock in the gains.
 
I'm hoping to pick up some TripAdvisor (TRIP) on a big dip at the open. I don't hold it currently, but it has been on my list to buy.
 
-- Jack Krupansky

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