Monday, September 22, 2014

NASDAQ poised for a test

Okay, NASDAQ has now had two full weeks (minus Labor Day itself) for the "heavy hitters" to get back from summer break and "get back into the saddle" and revise NASDAQ after its summer movement, not to mention a couple of days to digest the most recent Fed pre-positioning in advance of finishing their QE purchases next month. That should be enough time, so now it's time for those heavy hitters to start to make their opening fall moves. In fact, tomorrow is the first day of fall. But... today will be one last opportunity for bears to make their move. Also, even though people had a couple of days to respond to the Fed statements, a weekend can give people a lot more room to deepen or revise their convictions.
NASDAQ is down all of 0.48 points since the end of August, about as flat as can be, suggesting that there is no solid sentiment as to market direction. That's bad from a purely bullish perspective, but equally bad from a purely bearish perspective. Ultimately it's all a matter of money flows rather than the perspective of people noisily promoting their perceptions of the coming trend. It's investors sitting on the sidelines with cash they are ready to invest, or already invested and anxious to protect profits who hold the key.
In short, futures traders are merely guessing or speculating how people will react today. They are entitled to guess, but that doesn't make them automatically correct in that guess.
My feeling is that the most anxious investors have already taken their money off the table, probably earlier in the summer (July was a down month for NASDAQ), and most certainly during the flat to weak market of the past two weeks.
NASDAQ futures are down moderately sharply, indicating a sag at the open, but... the real question is how people react – will they pile on for a deeper sell-off, or... will they buy the dip? That's the test, for today.
We could see a fair amount of negative trader sentiment over the next several weeks as traders "worry" about how the market will respond to the Fed QE purchasing end next month, but... as they say, "a bull market climbs a wall of worry."
-- Jack Krupansky

Friday, September 19, 2014

Waiting for Alibaba to open

It's now past 11:00 AM and still Alibaba (BABA) stock has not started trading on the NYSE after its IPO. I have my small limit order at $92 and "indications" are $88-90, with an open within maybe half an hour.
My initial limit order was at $78.50, then I raised it to $85, both before any indications had been given publicly. Once I saw an indication at $86-88 I raised my limit to $89. When I saw the indication at $87-89 I raised my limit to $92.
Some people say they will open at $88 since that is a lucky number. And some say more of the sell orders are at $90 or higher, so I feel my $92 limit is safe, for now.
I'll move my limit to be $2 over whatever latest indication I see on CNBC.
-- Jack Krupansky

Thursday, September 18, 2014

Alibaba IPO strategy

I don't have the connections to get in on the actual IPO of Alibaba (BABA), so I'll be playing it strictly on the secondary market. They'll "price" the IPO this evening sometime, like in the $66 to $68 range. About an hour or two before the market open on Friday brokerages will start taking "indications" or limit orders. No market orders are permitted before BABA itself opens, which could take a half hour or more after the normal market open when the market makers see those indicated orders settle into an orderly market or a fairly narrow range.
My guess is that BABA could open at a 20% premium to the IPO. So if it prices at $70 due to very strong interest, it could open at $85. That's a fair (but not great) price to me. Sure, it could come in at $100 or more, or maybe only $80 or $75 with equal probability.
As soon as I see the initial indications, I'll place a limit order of only modest size a fair amount below the indicated price at that moment. I'll watch it carefully and move my limit order up or down as the indication changes. As we get closer to the normal market open at 9:30 AM I'll narrow my limit order to just a little below the indication.
If the indication is substantially higher than the IPO price, shortly before the normal market open I may split my limit order in half, with half at or above the indication to assure that I will get a small position at the open, and half a moderate amount below the indication to catch any moderate dip during the day. Later in the day on Friday I may make a second purchase if the stock dips significantly from the opening price.
My main strategy is to not go "all in" on the secondary market at the IPO, but to expect to buy more on later dips, as I did with Twitter and Facebook. So, my total position size at the end of the day on Friday may only be half of my ultimate position size.
It will be interesting to see how Twitter (TWTR), Facebook (FB), and Amazon (AMZN) react as the BABA IPO plays out.
Note that BABA will be listed on the New York Stock Exchange, as Twitter is, so it will have no direct impact on the NASDAQ index, except to the degree that Amazon, Facebook, et all move in reaction to the IPO.
I'm definitely not betting on any single horse here. We have a lot of very strong companies out there now – and a lot more waiting in the wings. The dot-com era is about to be eclipsed, big time.
-- Jack Krupansky

Thursday, September 04, 2014

NASDAQ poised to bounce back from a minor bear attack

That was fun. NASDAQ did indeed have a nice pop at the open on Wednesday, as futures indicated, but as I had indicated, futures tell you how the market will open, not how people will react after the open. I said that it was an open question of whether people would pile on to the rally or sell into it – they clearly ended up doing the latter. It was an example of "buying exhaustion" – everybody who was prepared to buy had already done so, so there was no further immediate upside available, so traders reversed their bias and down we go. The selling pressure really only lasted for the morning, with NASDAQ bouncing a little and closing a few points above that noon level. So, the good news is that selling pressure was only modest to moderate and not sustained, but the bad news is that the bulls held back from buying the dip with anything resembling enthusiasm. Maybe the bulls just wanted to see what else the bears might be prepared to offer, and the same sentiment on the part of the bears – a classic waiting game.
It's still too soon for all the heavy hitters limping back from summer break to be firmly in their saddles, so we still don't know their net risk bias, whether we're going to be facing "risk on" or "risk off" in the coming weeks. Give them another week or so, for the dust to settle, sort of.
NASDAQ futures are up moderately, indicating another pop at the open, for a recovery bounce, but... this could be another fake-out, a "dead-cat bounce", or traders simply trying to tee up the market for a fresh bear attack. IOW, it remains to be seen, again, whether people will pile on to any initial rally or sell into it. I expect plenty of volatility as people engage in a tug of war to determine the market direction.
I'm going to be traveling, out of town, and mostly otherwise occupied for eleven days starting on Friday, so I may miss a lot of the action. I have a good combination of exposure to the market and decent cash reserves, so I'll be well-positioned no matter how the next twelve days play out, but I may miss out of buying any short-term dip opportunities. My next big trading day will be Tuesday, September 16, 2014. It will be interesting to see how the market plays out during that interval.
-- Jack Krupansky

Wednesday, September 03, 2014

NASDAQ poised to extend its rally

NASDAQ managed to extend its rally in the first trading session after the Labor Day break, which is rather impressive. Futures indicate another pop at the open, but once again we need to wait and see whether more people pile on or sell into the rally. For now, the bears are being kept at bay. But as I have said, it may take a few days or even a week or two for the heavy hitters to get firmly back in the saddle and chart a more definitive market course for the coming months.
-- Jack Krupansky

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