The battle resumes for NASDAQ

Although last week ended on a rather sour note for NASDAQ, I would simply note that last week was the catch up for all of those market participants who went on holiday for the preceding week which was shortened by the three-day weekend. Now that that adjustment is behind us, we are back to where we were two weeks ago, trying to sort out the bulls vs. the bears. There haven't been any big disasters on the earnings front, or in Ukraine, and the economy continues to limp along reasonably solidly, so there is not a whole lot of reason for any big sell-off at this point. There is some of the "sell in May and go away" sentiment brewing, but it is always a coin flip on that front.

 

Stock futures are up modestly, which suggests a recovery bounce from Friday's sell-off, but futures aren't always reliable. The big question is whether there will be much "sell into any rally" sentiment on any bounce. We'll see soon enough.

 

Meanwhile, I'll continue to use any big sell-offs for individual stocks as a buying opportunity.

 

-- Jack Krupansky

Mixed bag for NASDAQ this coming week

The factors for NASDAQ this coming week are quite a mixed bag. All bets are off. Expect... volatility.

 

On the negative side:

 

1. Lingering anxiety about Q1 results due to the weather-related slowdown.

2. Last week was quite volatile, with a new short-term NASDAQ low and wild swings between positive and negative territory.

3. Last week was a holiday-shortened week – a lot of key market participants were simply off for an extended holiday. They will tend to renew their downside push in the coming week.

4. Lingering geopolitical risk due to uncertainty about collateral damage and blowback from any enhanced economic sanctions.

5. The economy is still only so-so.

 

On the positive side:

 

1. NASDAQ did advance for the week. Always a positive sign.

2. The underlying economy remains reasonably solid and incrementally recovering, albeit at a sluggish pace.

3. Lackluster and weak Q1 results are already well backed into the cake.

4. Too many bearish short-term speculators leaning too heavily in the same direction will eventually lead to a dramatic short squeeze.

5. Plenty of relative bargains to attract bullish speculators.

 

I'm still betting on a continuation of the bull market advance, but we'll need a lot more than a 2% bounce to assure than the low for this correction is behind us.

 

I expect to open or add to several positions this coming week.

 

-- Jack Krupansky

The battle continues, ahead of a holiday weekend

The nice gain for NASDAQ on Wednesday was quite welcome, but may or may not stick. There is still a significant possibility that this week's gains may only be a classic dead-cat bounce. I'm betting that the gains will stick, but I've been wrong before, so I'm also getting ready to buy more stock(s) on any significant dips.

 

Tomorrow, Friday, April 18, is a stock market holiday (Good Friday), so today is the last trading day before the long weekend. There will be a bias towards closing out short-term speculative positions ahead of the long weekend, when anything can happen. That said, NASDAQ futures are up on general relief that quarterly reports were not worse. OTOH, bearish short-term speculators will probably continue to sell into any rally. Even that said, the balance of power between the bulls and the bears remains unresolved, so how the day opens is not a reliable indicator of how it closes.

 

It will be interesting to see how GOOG and IBM fare today. I may buy a little of both on any dip.

 

-- Jack Krupansky

The struggle continues, but NASDAQ hangs in there

Although the bearish short-term traders and speculators were able to push NASDAQ down to a new near-term low (but still not a 10% decline from the near-term peak), more bullish market participants joined in for a strong recovery rally into the close for a modest net gain for the day. True enough, the battle over the short-term trend is not over – we're still in dead-cat bounce territory. It may take another few more days to resolve the short-term trend.

 

Futures are poised for a nice pop, but it remains to be seen if bearish market participants will simply sell into the rally or reverse and "ride the tide." Either way, today won't be definitive for the short-term trend.

 

I'll be adding to or opening a couple more positions today.

 

-- Jack Krupansky

The struggle continues, with no clear trend

The short-term struggle between the bullish and bearish short-term speculators continues, with no clarity of the short-term trend. The gain for NASDAQ on Monday was quite welcome, but could just as easily merely be a classic dead-cat bounce ("even a dead cat can bounce") as a true trend reversal. Similarly, neither a positive nor negative move today will in any way be truly definitive in terms of a clear trend. We'll have to see where things are in a week or so.

 

I suspect that as the flood of quarterly reports begin, we will see more clarity as to whether people are either relieved that the results were not worse or disappointment that the results weren't better. As of right now, a lot of cynicism is baked into expectations, so a relief rally is more likely than not.

 

Meanwhile the back and forth of the tug of war between the bulls and bears continues. Flip a coin as to whether NASDAQ will be up or down in 15 minutes.

 

-- Jack Krupansky

Some kind of bounce, but will it be a dead-cat or real?

Futures are pointing to a pop at the open, but there is no sense as to whether it will merely be another dead-cat bounce or a real bounce that actually does start a new leg for the underlying bull market. I lean towards the latter, but it is impossible to pick the precise day when that happens.

 

That said, I'll be starting a regular plan for opening or adding to positions on a weekly basis, similar to dollar-cost averaging.

 

-- Jack Krupansky

NASDAQ below 4,000?

NASDAQ is poised just a hair under the psychological 4,000 level, at 3,999.73. That's very slightly above the closing level of 3,996.96 on February 3, 2014, which would be a "support" level. NASDAQ had dipped down to 3,991.64 on Friday before rallying a little into the close. The closing level of 3,998.40 on December 12, 2013 also provides technical support. None of that in any way means that bearish sentiment is exhausted, but there are a lot of traders and short-term speculators who do make decisions based on these kinds of levels and support.

 

The closing levels of 3,921.27 on November 20, 2013 and 3,857.33 on November 7, 2013 provider deeper support that is closer to the 10% correction range.

 

The NASDAQ peak for this bullish cycle was at 4,371.71. A 10% correction would amount to 437.17 points, which would be at the 3,934.54 level.

 

I'm making a short list of stocks to start buying at these levels. I'll buy incrementally, maybe two to five positions a week since there is no sense of certainty for how long this mini-correction will last. It could graduate to a full-blown correction on Monday – or not. We could still see one or more additional dead-cat bounces before the bearish short-term speculators reach selling exhaustion.

 

-- Jack Krupansky

NASDAQ still nearing end of the mini-correction

Yeah, a 130-point decline for NASDAQ is rather breathtaking, but that was after a two-day rise of about 100 points, so we're really just seeing a tug of war between the bearish and bullish factions of the short-term speculators. I still think that this battle is getting near an end in the sense of a true declining trend, but of course we can't predict exactly how many days it will take to play out. It is rather clear that the battle is primarily technical in nature rather than fundamental – the economy is decent and getting stronger, but technical chartists will insist that certain "tests" and "corrections" are needed before  advancing further.

 

If the bearish speculators do manage to push NASDAQ down to 3,900, then we would have seen a full-blown correction.

 

Hang in there.

 

-- Jack Krupansky

NASDAQ still waiting for confirmation of near-term trend

The nice gain for NASDAQ on Wednesday was quite welcome, but we're still in relatively uncharted territory, in that the two-day gain may still have been only the proverbial dead-cat bounce. It will take another couple of days before the near-term trend sorts itself out. And of course Friday will be a tough day since there is still a fair amount of geopolitical risk which causes a lot of people to exit positions in advance of the weekend when anything can happen.

 

I'm actually happy that futures are down, since it really is still too early for short-term speculators to get overly-excited after a two-day bounce after a new near-term low. If futures had been up this morning, I would have then expected the bearish short-term speculators to "sell into any rally", but with futures being down, I expect that semi-bullish near-term speculators will give serious consideration to "buying the dip." No guarantee of that, but it is a default bias.

 

The good news is that the economic outlook is still reasonably solid, which is the foundation of any bullish stock market.

 

-- Jack Krupansky

Possible dead-cat bounce, but may have hit selling exhaustion

The semi-decent bounce for NASDAQ on Tuesday was quite welcome, but may indeed be the proverbial dead-cat bounce that precedes a further decline. Only time can tell. The good news is that even though a new near-term low was hit early in the day, NASDAQ managed to bounce up nicely from that low, which strongly suggests that the short-term bearish speculators did indeed reach "selling exhaustion", the point where nobody was left to sell - everybody likely to sell in the near-term had already done so. But, the nice pop could simply have been a modest short squeeze, which is not a completely reliable indicator of a trend.

 

It will take a couple more days to sort out the trend. Even if we do establish a series of up days, the question is whether more bearish short-term speculators are simply biding their time and waiting for near-term buying exhaustion before renewing their short positions.

 

It really does feel like we are near the end of the recent mini-correction, if not yesterday or the next couple of days, then within a week or two. A lot of people were probably simply pre-positioning for weakening in Q1 earnings. The likely outcome is for stocks to rally as the Q1 earnings reports are put behind us - a classic case of "sell the (bad) rumor, buy the news."

 

For today, the question will be whether bearish short-term speculators continue to "sell into any rally" or actually do bite the bullet and  reverse their bias to a more bullish "risk on".

 

-- Jack Krupansky

Due for a dead-cat bounce?

Yeah, the further decline of NASDAQ on Monday was a disappointment, but the good news is that there was a moderate bounce off the low for the day, suggesting that the short-term bearish speculators may indeed be running out of steam. They can't follow that same pattern for too long before those of them sitting on significant profits from the recent decline start to reverse and start betting on a bounce.

 

Sure, any initial bounce can be a traditional dead-cat bounce, but once again you can't have too many of them before the bearish speculators start to lose their enthusiasm and seek to protect their profits, and to begin to bet even more on a bounce.

 

In short, sure, there could be a bit more weakness, but absent any dramatic weakness in the economic outlook, a solid bounce is due within relatively short order.

 

-- Jack Krupansky

What's next after Friday's 110-point NASDAQ plunge?

Sure, a 110-point decline for NASDAQ is not something to be easily ignored, but... A lot of what has been happening over the past few months is due to some serious hot money that is not committed to a particular market direction. If stocks look like they have run out of upwards momentum, the hot money piles on on the short side. And that continues until the downward momentum peters out. Then they reverse course, rinse and repeat.

 

Friday was a tough day also because short-term speculators are reluctant to sit in positions ahead of a weekend when geopolitical concerns are in play.

 

Sure, there are legitimate concerns about Q1 earnings, but most of that has already been priced into the markets, and are primarily due to weather issues rather than any persistent economic weakening. To wit, I flew from New York to Colorado on Friday morning and the plane was full – not an indicator of a weak economy.

 

The bad news from Friday was that NASDAQ broke below its recent low, which says that there is a fair chance that a renewed downwards trend is being established. On the other hand, the new low is lass than 1% lower, so it is also possible for it to essentially establish a double bottom, and then form a more solid base for the next leg higher.

 

Overall, the economy is not doing so bad, so there is no solid reason for some short-term weakness to amount to more than that. Sure, the hot money on the down side might persist, but I think it's a fair bet that the short-term bears are close to running out of steam. The 62-point rise on NASDAQ earlier last week was a bit much for the bearish speculators to accept, so they really had some intense enthusiasm for erasing that gain and more. I grant them that. Hey, at least it was fun to watch.

 

Again, the outlook for the economy months down the road should be a better guide for how and what to bet on for stocks.

 

Flip a coin whether Monday is weak for NASDAQ. By Wednesday we'll have a clearer view of the short-term trend.

 

-- Jack Krupansky