Still looks like capitulation is behind us
Although NASDAQ did end moderately lower yesterday, it was still consistent with Wednesday being the true capitulation day. There was a sharp spike down at the open and then a sharp but short-lived dead-cat bounce into positive territory, but the bears were unable to establish a deeper low after that initial spike down. In fact, NASDAQ drifted a little higher through the day, indicating a modest evaporation of the bearish sentiment. Sure, there is still plenty of bearish sentiment out there, but it does appear to have peaked and started to decline.
We could see a bounce today, and futures do indicate that, but there could still be a fair amount of "sell into any rally" sentiment out there. Also, today being a Friday, short-term speculators will tend to close out positions ahead of the weekend when anything can happen. The situation in Ukraine still doesn't have a lot of prospect for affecting economic growth in the U.S., but short-term traders can easily get spooked by things like President Obama warning Russia to move troops away from the Ukraine border, combined with significant uncertainty of Russian intentions and how the U.S. and Europe may or may not respond.
So, NASDAQ may or may not close higher today, but that won't be a definitive move. Ditto for Monday, when short-term traders will likely focus on re-establishing whatever positions they closed out today.
In short, it may still take a few more trading sessions for the aftershocks of the capitulation of the mini-correction to settle out. By Wednesday or Thursday of next week we should see the new trend start to take shape. Regardless, it will continue to be a bumpy road.
-- Jack Krupansky