Monday, November 24, 2014

NASDAQ to plod through slow holiday week

NASDAQ trading this week will be slower and more volatile since fewer market participants will be at their desks due to the holidays, both the actual holidays and because people take off more days for either a long weekend or to take off the entire week. Whatever happens this week will be subject to revision or even a complete reversal next week as the holiday revelers get back to their desks next week.
 
There will be some amount of pre-positioning by speculators trying to get the jump on holiday retail sales since Friday is the infamous Black Friday that kicks off the Christmas shopping season. Solid data won't be available until the weekend, so the big reaction won't occur until Monday and Tuesday as the official numbers become more solid, but traders and speculators will react instantly to rumors and anecdotal news reports on Friday morning. Note that the stock market will be open Friday morning, but close at 1 PM.
 
NASDAQ futures are up moderately, indicating a moderate pop at the open, but as always it remains to be seen whether people pile on to that opening gain or simply sell into the rally, and then we will see how trading evolves during the day. On both Thursday and Friday we saw vividly how trading instantly moved in the opposite direction of the opening move. Of course, just because it can happen and did happen two days in a row doesn't mean that it is likely to happen again today.
 
NASDAQ is now in a limbo state, with no great incentive to march strongly higher nor sharply lower. The default will be to "grind higher", with occasional days of consolidation. That's not to say that we won't see occasional sharp moves of a full percent or more, but simply that quarter and half-percent moves are more likely.
 
Personally, I'll continue to be incrementally and selectively taking small portions of my gains to raise my rainy day cash reserves, as well as taking advantage of any dramatic (and almost always irrational) dips of my favored stocks.
 
-- Jack Krupansky

Friday, November 21, 2014

NASDAQ poised for a short squeeze

Traders succeeded at testing the durability of the NASDAQ advance on Thursday, setting up a moderately deep dip at the open which was an invitation for a selloff, but nobody took the bait, and instead we saw significant dip buying, which is a good sign that there is still significant bullishness out there. NASDAQ even managed to reclaim the psychological 4700 level (okay, just barely, by a mere two points.) Today, traders will do the opposite and test how much interest there is in a new "leg" for the advance. Futures are up sharply, indicating a big pop at the open, but as usual the big question is whether speculators follow suite and pile on to extend those gains or reverse their bias and sell into the rally.
 
The big pop at the open could trigger a round of short covering by bearish speculators who were betting too heavily that the advance was over. That's also known as a "short squeeze" as bears are "stopped" out of their short positions to avoid further losses. The bad news is that stopped-out bears will then be sitting on the sidelines with their cash, impatiently waiting for the advance to run out of momentum again, when they will pounce again with renewed and increased vigor. Meanwhile neutral speculators may simple revise their bias to more of a "risk on" position as the advance "shows legs", and fueling an even stronger advance, but it is unknown how many of these people are really out there.
 
It's a Friday again, so a fair number of short-term speculators will tend to close out positions ahead of the weekend, not to mention ahead of a shortened holiday week, when anything can happen. Whether these folks have net long or net short positions to close is unknown but will determine whether they will be selling or buying today.
 
Personally, I will continue to incrementally and selectively be harvesting a small portion of my gains to raise my reserve cash levels for the inevitable rainy days and future dip purchases. Right now I am still a bit over-invested, including some dip purchases made on margin.
 
-- Jack Krupansky

Thursday, November 20, 2014

NASDAQ traders poised to test durability of the advance

NASDAQ has had a nice run recently, so it is only natural that traders will eventually "test" the durability of that advance. Today may finally be that day – or not. Futures are down moderately sharply, indicating a moderate dip at the open, but whether people really do pile on after that dip and kick off a significant selloff or whether they buy the dip remains to be seen. A moderate degree of "consolidation" is completely reasonably at this stage, but that doesn't mean that it will in fact happen or even that it will in fact be "moderate" if it does happen.
 
Despite chatter about the rest of the world or even the price of oil or other commodities, the U.S. economy continues to incrementally recover and run at a pace not driven by the rest of the world, albeit in a semi-chaotic manner, which confuses traders and short-term speculators, but is good new for longer-term speculators and true investors.
 
I'll continue to simultaneously look for opportunities to cash out small portions of outsize gains to raise rainy-day cash reserves as well as add to positions on outsize dips. Twitter (TWTR) is still one of my prime targets for dip buying. I cashed out of some Staples (SPLS) on its big gain yesterday. I may sell some extra Cypress Semiconductor (CY) that I bought on its dip and that has recovered nicely.
 
-- Jack Krupansky

Wednesday, November 19, 2014

NASDAQ continues to grind higher as hedge funds keep the faith

Hedge funds and other speculators have so far refused to give up faith in NASDAQ, allowing the index to "grind higher", setting both a new high for the year and finally closing above the psychological 4700 level for the first time since the dot-com days of 2000. The great unanswered question is how long hedge funds will maintain a net "risk on" bias. I mean, at some point they will start taking money off the table, but whether that day is today, tomorrow, next week, next month, or next year is anybody's guess.
 
NASDAQ futures are down modestly, suggesting a modest dip at the open as traders are also uncertain about the durability of the upwards trend and feel that a little consolidation would not be unreasonable. The big question is not how the market will open, but how the hedge funds and other speculators will respond to any dip, either piling on for a selloff or buying the dip.
 
Personally, I'm starting to consider positions I can start trimming a little to raise higher cash reserves for the inevitable future rainy days, but otherwise I'll remain relatively fully invested.
 
-- Jack Krupansky

Tuesday, November 18, 2014

NASDAQ waits for hedge funds to make their next move

NASDAQ finally had a modest bit of consolidation on Monday. Futures are bouncing back and forth between slightly positive and slightly negative this morning as traders are completely unsure as to the next move of the markets, whether is be more consolidation, range trading, or a new leg upwards. IOW, the market will open roughly flat and then all bets are off. Then, people will wait to see how the hedge funds and other short and medium-term speculators either maintain or shift their bias between "risk on" (bullish) and "risk off" (bearish.)
 
One thing is clear though and that is that there is no passionate and committed interest in pushing NASDAQ to a new all-time high exceeding the peak of the dot-com days. That's fine with me. I'd rather see a "slow and steady" market that "grinds higher" and with occasional bouts of consolidation as we have seen recently.
 
Continued range trading seems the more likely path of least resistance over the next few months, with a mix of a slow grind higher, consolidation, and range trading.
 
One of the problems for the bearish speculators is that they bet heavily on the recent correction, but failed to comprehend its brevity and how rapidly the market bounced back, leaving a lot of people sitting in a "risk off" posture which left them underperforming their more adventuresome peers. That may leave more speculators a little more prone to take on more risk than they might otherwise do if left to their own personal bias.
 
-- Jack Krupansky

Monday, November 17, 2014

NASDAQ still poised for a little consolidation as it continues to grind higher

The old saying is that "a bull market climbs a wall of worry", and right now people are starting to become more than a little antsy about the global economy and the degree to which NASDAQ may be overvalued. That said, the U.S. economy is still plugging along at a semi-decent clip and continuing to recover incrementally, albeit at too moderate and uneven a pace to get Wall Street terribly excited – but that may be a good thing since Wall Street euphoria always ends badly.
 
The big question right now is what fraction of short to medium-term speculators are still open to maintaining and increasing their bias towards "risk on". Once that group starts to peter out, NASDAQ's upwards momentum will peter out as well, until we hit the point where a sizeable fraction of those short and medium-term speculators begin to jump ship in numbers large enough to bend the arc of NASDAQ into a downward trend again or at least some consolidation and range trading. Unfortunately, there aren't much in the way of numeric market indicators to judge those trends except after the fact.
 
NASDAQ futures are down modestly, indicating a modest dip at the open. The question is whether speculators pile on and turn that dip into a rout and sell-off or whether they buy the dip and kick off another short squeeze that pushes NASDAQ to yet another high for the year.
 
NASDAQ pushed above the psychological 4700 level briefly on Thursday, but there was too much resistance. NASDAQ still managed to close up for the day every day last week, so clearly there is at least some upwards momentum in play. How long that momentum lasts before some significant consolidation remains to be seen. I'm sure that traders will seek to test that 4700 level of resistance in the near future. Whether deep-pocket speculators (e.g., hedge funds) will use that level as a trigger for reverting from a "risk on" bias to more of a "risk off" bias remains to be seen.
 
For now, NASDAQ seems poised to both grind higher but with growing odds of some consolidation along the way.
 
Ultimately it will be the health and strength of the U.S. economy that will drive interest in (U.S.) stocks. The rest of the world is still slogging through the aftereffects of the financial crisis and at a slower pace than the U.S., but eventually Europe will work through their own mess and then join the U.S. on our superior growth track. Hey, even Greece managed to post positive GDP growth after all of their troubles.
 
-- Jack Krupansky

Wednesday, November 12, 2014

NASDAQ continues to grind higher, but still has a need to consolidate a bit

NASDAQ has been remarkably resilient in recent days, "grinding higher", and resistant to any efforts to force a least a little consolidation. Let's see if today is any different. Futures are down moderately, indicating a dip at the open, but whether that dip snowballs into any significant consolidation or an outright selloff, or simply triggers yet another round of dip buying is a coin flip.
 
Yesterday I sold off some dip purchases of Bank of America (BAC), Amazon (AMZN), FireEye (FEYE), NetFlix (NFLX), and TD Bank (TD), but made another dip purchase of Twitter (TWTR).
 
Personally, I prefer the "grinding higher" mode of the stock market since the gains tend to be more durable, as opposed to big leaps that are mostly short covering that quickly evaporates and tends to reverse fairly quickly.
 
-- Jack Krupansky

Monday, November 10, 2014

NASDAQ to take a shot at a clean breakout and a new leg up

Bearish short-term speculators have tested NASDAQ at the 4600 level on four successive days and that key psychological level has held for NASDAQ every single time, which is a reasonably positive sign. That gives traders good reason to bet that NASDAQ is ready for a cleaner breakout above the 4600 vicinity and a solid start for a new leg up. That's not to say that diehard bears won't take a much more forceful run at 4600, especially if insufficient buying enthusiasm fails to materialize among bullish speculators – who may actually be just as willing to settle for a wide trading range as see a weak new leg – but at least the potential is clear.
 
This week will be a clean slate for the market, with so many critical anxieties behind us. That's not to say that success is a slam dunk, but just that a default bias is clear, at least until speculators, fresh back from a weekend to carefully consider their options, get back to work today and tomorrow.
 
Overall, I would say that it's still a 50/50 coin flip whether NASDAQ stays in a narrower trading range here, or stages a cleaner breakout and a tentative new leg up.
 
NASDAQ futures are up moderately, suggesting a moderate pop at the open. Whether bullish short-term speculators follow through with some fresh shifting to a "risk on" bias to counter lingering bearish enthusiasm among cynical bearish speculators remains to be seen. Futures tell us how the market will open, not how it will trend through the day.
 
-- Jack Krupansky

Friday, November 07, 2014

NASDAQ poised to get back to business as usual

Except for the fact that today is a Friday, when some fraction of the short-term speculators tend to close out positions in advance of the weekend when anything can happen, NASDAQ is finally getting ready to put a lot of the recent anxieties behind it. We've had plenty of time to resolve anxieties related to the Fed meeting that ended the QE buying program and the election results are mostly accounted for, and rate hikes are "many months" down the road, so finally people can focus once more on economic and business fundamentals.
 
The economy really is okay, continuing to incrementally improve almost every day, even if the measured progress is a bit rocky at times. Maybe not "clear sailing" yet, but pretty darn good as compared to the rest of the world.
 
NASDAQ did try to "test" the psychological 4600 level again yesterday and the market held up, so that is yet another good sign. And there was some clear buying through the afternoon and into the close, which is another good sign. I mean, if hedge funds needed an excuse for a larger selloff, they clearly missed that boat in the morning when the market was shakier. In short, we really are poised to establish a clear breakout and new leg up from the earlier broad trading range. That's not to say that this is a slam-dunk certainty, but simply that it is a realistic possibility.
 
Oops... I forgot to pick up some more Qualcomm (QCOM) on its big dip yesterday.
 
-- Jack Krupansky

Thursday, November 06, 2014

NASDAQ set to try a little more consolidation

Wow, that was they shortest honeymoon ever, with NASDAQ popping 22 points at the open and then heading straight down and into the red in a mere 20 minutes. This tells me that the overall speculator sentiment is quite bearish, at least in terms of desperately wanting to see NASDAQ do some serious consolidation after the big advance next week. And then the big question is whether we will be poised for a new leg up or merely to trade back down in a broader trading range.
 
NASDAQ is still safely above the 4600 level and remained so even at its lowest point yesterday. That's a good sign, although a weak one.
 
NASDAQ futures are down modestly, suggesting a modest dip at the open and that traders are merely hesitant but not committed to a specific trend. The question is how speculators set their bias after that opening dip – either "risk off" and they pile on to the dip for a real selloff, or "risk on" and they buy the dip. Both are possible but sentiment seems biased towards the former. Beware, because sentiment is frequently a lousy leading indicator, not always wrong, buy simply frequently not always right – only a modest correlation with the actual emerging trend.
 
We could just see a fair amount of volatility and narrow range trading until we get enough time behind us for memories about the Fed and election anxiety to have faded enough for people to focus on the economy and business outlook going forward over the next six to nine months. Even if the Fed does start raising rates in June, rates will still be too low to have more than a very modest negative impact on the economy for more than a year out, well beyond the "planning horizon" for short and medium-term trends in the market.
 
-- Jack Krupansky

Wednesday, November 05, 2014

NASDAQ set to bounce on relief over the big Republican win

NASDAQ did a little of the consolidation thing on Tuesday, coupled with a little last minute anxiety over the looming election, so today should see a nice bounce for stocks in a "relief rally" now that the Republicans solidly secured their victories, with a clear Senate majority and a couple of governor wins that don't depend on runoffs or recounts. Nothing like a little certainty to boost the markets. We're also likely to see some short-covering for momentum stocks which tend to suffer outsize declines whenever consolidation occurs or buying enthusiasm wanes even modestly.
 
NASDAQ futures are up moderately sharply, indicating a nice pop at the open. It will be interesting to see how much the election results push fence-sitters to jump in and buy with vigor, or whether there are still plenty of cynics lined up to bet even more against the market that they insist is "overvalued."
 
The dust should finally be settling from the over-effects of the Fed meeting last week. The election rally should finally close the door on that episode. Jockeying over whether the first rate hike ("liftoff") will occur in March, June, or September will begin in earnest once the election euphoria fades, but that's months down the road.
 
There has been a fair amount of anxiety over quarterly results and weak guidance for the coming quarter, but I'm not so sure that wasn't really simply displaced anxiety over the election. Nonetheless, that anxiety has presented us longer-term investors will a fair number of buying opportunities. I picked up some more Priceline (PCLN), Twitter (TWTR), and Facebook (FB) on their sharp declines, and intend to pick up more FireEye (FEYE) and Pandora (P) today. Thank you, Wall Street, for these bargains!
 
-- Jack Krupansky

Tuesday, November 04, 2014

NASDAQ poised to consolidate

As expected, NASDAQ was somewhat weak on Monday after the big gains last week. Some consolidation is certainly in order after such a strong advance. The big question now is if the new high is a precursor to a true breakout or merely a modest overshoot at the top edge of the broader trading range. We could see a little volatility as traders and speculators dance around and struggle with answering that question.
 
NASDAQ futures are down moderately, indicating a dip at the open, but the question is always whether people will pile on to any dip to produce a significant selloff, or whether people will buy on dips and actually kick off a new leg up. Sentiment seems to prefer the former, but the real question is what bias short-term speculators (hedge funds) will take – either to take profits and bet on a downtrend or whether they have more bullish money yet to be deployed for the upside.
 
-- Jack Krupansky

Monday, November 03, 2014

NASDAQ poised to test whether a breakout can be sustained

The big NASDAQ gain on Friday was nice, but it smelled a little but like a short squeeze, so we need to see some stronger evidence that the new high for the year will stick and not simply mark a new higher edge of yet another trading range. We're still in the process of waiting for the dust to settle now that the Fed meeting with the end of the QE buying program is behind us. People will be listening carefully as the various Fed officials start weighing in with their own personal perspectives as to how the Fed will proceed with starting to "normalize" monetary policy, especially the timing of "liftoff" for interest rates. Now that investors and speculators, especially hedge funds, have had an entire weekend to digest the Fed meeting announcement, people will start adjusting their bets today and tomorrow.
 
NASDAQ futures  are down modestly, indicating that traders expect a little consolidation after the big gains on Friday, but the modest nature of futures strongly suggests that nobody is at all sure which way the markets will trend after the open, whether bearish speculators will re-open short positions they were squeezed out of on Friday, or whether more bullish speculators will seize this opportunity to build a more durable breakout and establish a new leg up for the market. This uncertainty suggests a likelihood of volatility, or potentially a continuation of the short squeeze.
 
Anxiety and uncertainty over the election will also temper the markets. On the one hand there is a lot of uncertainty, but there is also a decent likelihood that the Republicans will seize control of the Senate, providing a more business-friendly Congress that will appeal to markets. But even if the Democrats do manage to cling to a slight advantage in the Senate, Congress will remain gridlocked, which is usually the best outcome for Wall Street – Washington is kept at bay and unable to pass many new laws that might rock the boat. The markets could rally in advance of the election results, as a lot of the more adventurous Wall Street market participants seek to get a leg up on their brethren.
 
Today I get to attend the semi-annual meeting of the Shadow Open Market Committee, where Dallas Fed president Richard Fisher will give the keynote address for the symposium entitled "Preparing to Normalize Monetary Policy."
 
-- Jack Krupansky

Friday, October 31, 2014

NASDAQ poised for a nice bounce as market seeks its post-Fed feet

Yesterday was a tough day for stocks as they struggled to figure out where they should be now that the Fed is out of the picture "for a considerable time." It will take another two or three days to finish with this-dust settling process.
 
NASDAQ futures are up sharply, nominally due to the Japanese stock buying program, but in truth that is really more of just a cover by traders who are always reaching for excuses to "shake things up." Sure, we'll see a nice pop at the open, but the question is whether lots of people will pile on for yet another short squeeze or start selling into the rally. It's a Friday, not to mention a lot of people distracted by Halloween, so trading could be somewhat atypical with the weekend in front of us, when anything can happen. The real action will be on Monday when all the serious speculators have had time to digest and more deeply ponder the Fed statement and really start to place their serious post-Fed bets.
 
The big question is whether short-term speculators (the hedge funds) are looking to start trading down in the broader trading range, or... stage a breakout to new yearly highs for NASDAQ.
 
I'll be starting to look for opportunities to at least partially exit from some of my recent dip purchases as they hit 5%, 10%, and 15% gains.
 
-- Jack Krupansky