Thursday, March 27, 2014

And we have capitulation for NASDAQ

As dispiriting as the NASDAQ market decline was yesterday, there was a strong hint of silver in that very black cloud, namely that it had the earmarks of capitulation, a day when all the bulls finally threw in the towel, dumped their (short-term) holdings, and refrained from making any dip purchases. There was no bounce at all later in the day – NASDAQ just went down, down, and further down, closing at its low for the day with no hint of any recovery. Yeah, that looks really bad, and it is, but capitulation is what is always needed to mark the turning point for the end of a decline. Sure, we could see a little more weakness, and maybe even a dead-cat bounce followed by a further decline, but the appearance of a strong day of capitulation such as we saw on Wednesday is a very good and very promising sign that a new leg up for this bull market is about to begin. It may take another couple of days, but the writing is on the wall
 
Make no mistake, fundamentals are important, indeed the most important thing, but there is so much hot money flooding the hedge funds that they can swamp fundamentals and result in lots of mini-bubbles and mini-corrections as we have seen in recent months and years. The important thing is that the underlying economy is only getting stronger. Sure, we have have soft spots like a cold winter, but those are mere speed bumps relative to the overall economy.
 
-- Jack Krupansky

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