Friday, May 30, 2014

NASDAQ still holding up in face of consolidation attempts

Bearish traders and speculators have made a number of valiant attempts to push NASDAQ back down, but still haven't managed to succeed. That's not an absolute bullish sign, but it is promising. NASDAQ has broken out of its narrower trading range of 4,000 to 4,150, which is a good sign, but momentum is not guaranteed.
NASDAQ is still well below its recent peak of 4,358 on March 5, so there is no immediate pressure of any big test to determine whether NASDAQ will remain it its larger trading range or actually break out for a new near-term high – and stay above that level for more than a few days.
We're in the last trading day of May, so the "sell in May and go away" seasonal trading pattern has its last chance today, but even with a 100-point drop, NASDAQ would still be positive for May. This seasonal trading pattern could persist into the first couple of weeks of June before it is absolutely behind us.
It's also a Friday again, so short-term bullish speculators could dump their positions ahead of the weekend, when anything could happen. The flip side is that we could start hearing more positive news about Q2, so dumping bullish positions could be a bad move. Still, "taking a little money off the table" is a time-honored Wall Street trading tradition, so we'll have to see how the day plays out.
NASDAQ futures have a modestly negative bias, suggesting that traders feel that the recent mini-rally may be running out of steam, but that's not a reliable indicator of how longer-term speculators and real investors will trade as the day goes along. If the market does open with a dip, it will be interesting to see how many market participants buy the dip.
-- Jack Krupansky

Thursday, May 29, 2014

NASDAQ paused (poised?) and waiting for money flows

Okay, so NASDAQ did a little consolidation yesterday (Wednesday), probably not enough to satisfy any of the bearish short-term speculators, but did in fact manage to resist early attempts to consolidate more deeply, so that suggests that there are more than a few bullish speculators still not ready to throw in the towel.
NASDAQ futures are up very modestly, suggesting a modest positive bias, but with very little conviction. This is fine since the main question is how much money is waiting on the sidelines to make bets, positive or negative, as the trading day progresses. Even if there is a modest bounce at the open, it may get slammed with a bit of the "sell into any rally" mentality that pops up as a trendless market moves towards the upper portion of its trading range.
The "sell in May and go away" anxiety is still there, but just barely. Right now, it's more of a ghost, but market participants are so antsy that they could start selling at the slightest "Boo!" from that ghost. Ditto for a lackluster Q1.
The good news is that NASDAQ is actually up moderately for the month of May so far, about 2.7%. Seems like a classic example of "a bull market climbs a wall of worry." Still, in such a choppy market NASDAQ is quite susceptible to wild swings, like another 100+ point decline in a single day, not for any good reason, but just because traders and short-term bearish speculators can do it on a whim, with apparent impunity.
The stock market is supposed to be a "barometer" of the coming economy, anticipating six to nine months ahead, but on a very short-term basis (weeks) it can be rather frothy and choppy with day trading and very short-term speculating, as opposed to medium-term speculating (months) and real investing (years.)
I think the main catalyst a lot of people are waiting for is to start hearing more chatter about how companies are doing in Q2, which is now more than half over.
-- Jack Krupansky

Wednesday, May 28, 2014

NASDAQ poised at the fork in the road, again

Nice pop for NASDAQ on Tuesday, showing that there is indeed at least some bullish sentiment out there, but the question is how much. After any big pop, which typically involves a fair amount of short covering, a lot of traders become biased for consolidation or even reversal. NASDAQ futures are down slightly, indicating that corrective bias, but... very often futures are the opposite of the sentiment of investors and speculators on the sidelines waiting to place their trades as the day progresses who have the opposite mindset.
NASDAQ is also once again in the upper portion of its recent trading range, so unless there is some serious, real investor money ready to flow into the market, NASDAQ could quickly run out of steam before it hits the top of the trading range, and reverse and head back towards the bottom of the trading range.
I do think that once the "sell in May and go away" anxiety is fully behind us, as well as the lingering numbness of the winter and lackluster Q1 results, things could pick up. But right now the market is still somewhat confused as to its ultimate direction.
I'm positioned as a bull, but with some reserves to take advantage of any big dips in solid technology stocks.
-- Jack Krupansky

Tuesday, May 27, 2014

NASDAQ poised for... the unknown

Okay, the long holiday weekend is over and now it's time for the full complement of tanned and rested market participants to get back to work. Within a few days we will know whether the modest rise in NASDAQ last week was real, another head-fake, or just volatility in a slow market.
NASDAQ futures are up moderately, once again on no significant news, so once again the question is whether futures indicate a true trading bias or are merely "bait" to get people to lean the wrong direction before the deep-pocket traders, speculators, and investors weigh in with real orders as the day progresses.
Today is the first trading day after the long holiday weekend, so it could be choppy and simply represent people "testing" the market before they get more serious latter in the week.
We're in the final days of the "sell in May and go away" anxiety, although the reality is that "sell in May" can sometimes extend to the middle of June.
The next revision of Q1 GDP will come out on Thursday. It will probably be revised upwards, but still be small enough to depress people, at least superficially. Still, this is already old news, so the reaction could actually be the reverse of the news per se, what they call "sell on rumor, buy on news."
My bias is for NASDAQ to stumble upwards over the coming month. I have most of my core positions established, so mostly I am interested in solid stocks which get hit with 10% dips based merely on the fact that hedge funds do it simply because they can.
-- Jack Krupansky

Friday, May 23, 2014

NASDAQ drifts into the long holiday weekend

NASDAQ futures are showing a modest upwards bias and NASDAQ is up modestly for the week, but... It remains to be seen whether bearish market participants decide to sell into any early rally, or whether there are enough bullish market participants to extend this week's mini-rally. It's also Friday, so a lot of short-term speculators will exit positions ahead of the weekend, when anything can happen (including a presidential election in Ukraine.) And the fact that this is a long holiday weekend only intensifies the desire of short-term speculators to not be overly exposed to the market. The flip side is that fewer people were exposed to the market this week anyway since that is usually what happens in the week ahead of a long holiday weekend.
In short, flip a coin over whether NASDAQ extends its mini-rally today or consolidates a little (or even more than a little.)
The bad news is that none of what happens this week will in any way influence the trading bias when the rest of the market participants get back from their holiday. If anything, a higher level for NASDAQ will only increase the likelihood of a bearish attack next week.
The bottom line is that NASDAQ remains in a relatively narrow trading range, and probably will remain there until any lingering anxiety over the "sell in May and go away" seasonal trading pattern has evaporated, as well as the lingering echoes of the winter and Q1 sluggishness. I say give the market another 2 to 3 weeks, and then we will see a more clear trend as people begin to focus more seriously on Q2 and beyond.
-- Jack Krupansky

Thursday, May 22, 2014

NASDAQ continues to bounce around in its trading range

NASDAQ had another moderately nice pop on Wednesday, recovering all of Tuesday's decline and then some, establishing an upwards trend for the week. Today traders and short-term speculators will attempt to see if that upwards trend has some durability.
NASDAQ futures are up a little, but that could be another head-fake. What we don't know is the trading bias of the short-term speculators who are sitting on the sidelines, waiting to jump in or out of the market as today progresses.
Once again, this is a slower trading week in advance of a long holiday weekend, so any apparent trend this week is certainly not necessarily going to stick once the hard-core speculators get back, fresh, from the holiday weekend.
-- Jack Krupansky

Wednesday, May 21, 2014

NASDAQ firmly stuck in trading range

The retracement of much – but not all – of Monday's NASDAQ pop on Tuesday is further evidence that NASDAQ is still stuck in a trading range.
The good news is that traders were not able to set a new intraday low for the week yesterday, and that NASDAQ did recover well off its low for the day.
NASDAQ futures are up moderately, but on no significant news. Whether there is any true bullish sentiment behind the futures or just another head-fake will be seen shortly. This could well be another "sell into any rally" situation. Or... on a slow, pre-holiday week it could kick off a short-covering rally and push NASDAQ to a new short-term high, but still well within the current trading range.
In short, nothing that happens with NASDAQ today will in any way take NASDAQ out of this trading range.
That said, I still firmly believe that NASDAQ is simply working its way through the tail end of the mediocre winter and Q1 economic doldrums. Soon enough the market will shift to a focus on Q2 and beyond, where the economy is expected to return to its modest growth path.
Also, any thought that the Federal Reserve is going to "act soon" on raising interest rates is sorely misplaced. At most, they may accelerate the removal of quantitative easily, but it will be quite a few months before the Fed – and the economy – will be ready for even a modest raising of interest rates.
-- Jack Krupansky

Tuesday, May 20, 2014

NASDAQ waiting in limbo for guidance

After the semi-nice pop on Monday, NASDAQ is once again in limbo waiting for guidance, with no crystal clear short-term trend. The open question is whether the bearish short-term speculators have the will or decisiveness to attack strongly, and similarly whether the bullish short-term speculators have any will or decisiveness to continue rallying. They both seem to be running out of steam. I mean, the rally on Monday was okay but not great – less than a 1% gain. The real question here is whether either camp of speculators can mount a campaign for days on end, rather than this hit and run mentality we are seeing. But, that's to be expected in a traditional trading range. I suspect that NASDAQ will remain trapped in this trading range until the full brunt of mediocre winter and Q1 results and the whole "sell in May and go away" anxiety are safely behind us, like when the calendar rolls over into June.
Right now, I expect that more short-term speculators are more focused on getting ready for the long holiday weekend than what NASDAAQ might do over the next few days.
Meanwhile, I'll continue to be on the lookout for 10% dips on solid stocks to pick up. This morning it looks like Staples will be the pick. On the dip predicted by pre-market trading it will have a dividend yield of 4%.
-- Jack Krupansky

Monday, May 19, 2014

Next round in the battle for the NASDAQ trend

NASDAQ stock futures are down moderately this morning, indicating that traders think that this market deserves a negative bias. But the simple truth is that futures frequently fail to indicate the true sentiment of the people with the real money who are getting ready to make bets in the market throughout the day. The open question today is whether short-term bullish speculators are willing to buy into any opening dip for NASDAQ. But even if they do, the next open question is whether there is any significant follow-through, or whether the more bearish short-term speculators in turn sell into any recovery rally from any dip.
There is no economic or business news from this weekend or overnight that would give the overall NASDAQ market a negative tone. Sure, there is some merger and acquisition news, but that doesn't affect most NASDAQ companies.
Even Ukraine seems a little more stabilized this morning, so that is not a source for the negative tone of NASDAQ futures.
There is some chance that the bearish speculators will try to take another shot at pushing NASDAQ down, maybe try for a 50-point decline, or maybe even another 100-point decline – and they do have the ability to do so, but the big open question is whether they have the will to do so, or if they are shifting to a slightly more bullish bias in response to the outright resilience of NASDAQ over these past couple of months.
Once again, it will take a couple of days to get a better sense of how the week could play out.
It is also worth noting that Memorial Day is next Monday, so a lot of market participants may take off early for an even longer weekend, and in a lighter-trading market the moves can be exaggerated and not necessarily indicative of how the market will play out in the week or two following the holiday.
-- Jack Krupansky

Sunday, May 18, 2014

Hedge fund buyers are on strike

One perspective on what has happened with NASDAQ over the past couple of months and past year as well is that a lot of the bullish action over the past year was driven primarily by hedge funds capitalizing on momentum. Hedge funds have billions to throw around and they can certainly move the market. Traditionally, short-term speculation, which is what the hedge funds do best, could only move the markets for short periods such as a couple of months at a maximum, but since the end of the dot-com bubble retail investor interest in stocks has cooled enough that hedge fund activity can easily move the market a lot more and for a lot longer than mutual fund money flows driven by retail and institutional investors, such as retirement accounts and pension funds. I figure that hedge funds can now "move" the markets for periods of six months or more in any direction, before they run out of steam and reverse their course.
Not all hedge funds are created equal or have equal strategies or equal trading parameters. Many can be bullish even as others are bearish.
And they have no loyalty nor interest in the interests of everyday retail investors. They have no compunction to refrain from attacking companies and trying to drive their stock into the ground – for short periods of time. It is not uncommon to see a stock rise dramatically, then take a 10%, 25%, 30%, or even larger hit, and then bounce right back to a new high in fairly short order. This is volatility that profits the hedge funds at the expense of retail investors – unless the retail investor is smart enough to keep enough cash on hand to buy on these dips and pocket the profit of the rebound as well.
I think what we are seeing right now for NASDAQ, in particular the hotter momentum stocks of the past year is that the hedge funds are diligently engineering another one of these attacks, based not on company business fundamentals, but just because the hedge funds have the available capital to do so.
The current scenario has a number of stages:
  1. Bullish hedge funds run up stocks (last year.)
  2. Bearish hedge funds go into attack mode.
  3. Bullish hedge funds dump their stocks simply because the short-term momentum has evaporated.
  4. Formerly bullish hedge funds pile on on the short side to attempt to profit from the downward momentum.
  5. Retail investors and mutual funds dump momentum stocks as the downdraft becomes too painful.
  6. The process repeats, sometimes with recovery rallies which turn out to be temporary "dead-cat bounces."
  7. Eventually we hit "seller exhaustion" where everybody who is willing to sell has done so. At this stage the downwards momentum trend is gone and hedge funds gradually or quickly lose interest and begin closing out short positions, which kicks off a new bullish trend. This process is not clear cut, with lot of extended confusion, leading to false starts and trading ranges, with stocks moving both up and down on almost a daily basis, with no clear trend.
  8. Finally, enough of the bearish hedge funds bail out that the new bullish trend becomes more clear and sustained.
  9. Rinse and repeat.
So, where we are now is in stage 7, I think, with even formerly bullish hedge funds sitting tight and waiting for for stage 8 to play out.
Anxiety over the "sell in May and go away" seasonal trading pattern is in turn layering on top of all of that, possibly being the reason that stage 8 has not occurred yet.
The net result is that we are experiencing a so-called "buyer's strike" by the hedge funds as they wait for the new momentum to firmly take root and start growing.
From my perspective and looking at the NASDAQ chart, not to mention the state of the economy on a slow grind upwards, it looks like NASDAQ hit its near-term bottom back on April 11, 2014, and bearish hedge funds haven't been able to breach that level for over a month. But it is the lack of action by more bullish hedge funds ("on strike") that is now holding us back, even as even some of the bearish hedge funds may be beginning to sense the potential for a reversal for another leg upwards for NASDAQ – at some point.
NASDAQ is in a trading range, but that range seems to be narrowing, on both the high and low sides, suggesting that both bullish and bearish hedge funds are going on strike. Eventually enough of them will have gone on strike that collectively they will say "enough is enough" (not enough profitable momentum for each the bullish or bearish side) and then next bullish run will take off. Whether that happens within days or weeks remains to be seen.
-- Jack Krupansky

Friday, May 16, 2014

NASDAQ still in a holding pattern

Traders did in fact "fill the gap" yesterday, pushing NASDAQ down and fully erasing Monday's big pop, leaving the index essentially right where is was at the close last Friday (3 points lower, actually.) The good news is that the intraday low was not a new short-term low compared to the intraday low of last week. Further, NASDAQ did rally 30 points from the intraday low into the close, suggesting either some dip buying or that half of the intraday decline was simply day traders who shorted the market and then had to close out their short positions before the close.
Where does that leave us? Stuck in a relatively narrow trading range of 4000 to 4200. So, the bad news is that we're stuck in that range, but the good news is that the bears haven't been able to break down below it, try as they might, for as many times as they have tried.
The other way of looking at this is that NASDAQ is "building a base", establishing the 4000 to 4100 level as a solid base or "support" for an advance. But... that's not to say that the advance might come any time soon, or that the bears might not still gather enough energy to finally break below that 40000 level.
Today is a Friday, so short-term bullish speculators will tend to close out any lingering long positions ahead of the weekend, when anything can happen. OTOH, these lower levels make dip-buying attractive.
Futures are currently pointing towards a lower open, but all too often we see futures pointing in the opposite direction of how the trading session plays out later in the day, so... stay tuned.
There are a few stocks that I am considering for purchase on the dip – YELP, DATA, AMZN, EXPE, AKAM.
-- Jack Krupansky

Thursday, May 15, 2014

Filling the gap

Oops... I neglected to mention one other Wall Street trading mentality: filling the gap. There is a belief among traders that any gap "must" be filled before a further advance. The NASDAQ open at 4,121 on Monday was a gap of 50 points above the closing level of 4,171 on Friday, so... traders will feel an obligation to trade down through that entire gap range before they will "permit" NASDAQ to rise further.
That's all just short-term trading lore, so it really doesn't mean much for serious, long-term investors.
-- Jack Krupansky

NASDAQ remains in limbo, waiting for direction

The moderate declines for NASDAQ over the past two days erased a hefty chunky of Monday's big pop, but not yet enough to put the nascent rally into question. "Consolidation" is to be expected after a big pop. So, we are back to waiting for either the next big move, up or down, or an extended series of moves (more than a week) that more clearly establishes a trend.
But let's not be too complacent – the most angry of the short-term bearish speculators are probably simply biding their time for a few days to wait for a more opportune time to pounce for that next big 100-point NASDAQ decline. That said, it really does feel like the intensity of the bearish speculators is clearly on the wane. But that could change as conditions change.
We could also see one or more minor pops (15 to 25-point gains) of the dead-cat variety that could in turn lead to an increase in "sell into any rally" sentiment on the part of the bearish near-term speculators.
The good news is that we have "higher lows" in the recent trading history, which is a good sign. Unfortunately we also have "lower highs", which is a bearish sign. The combination is a mixed signal. You've got to love this stuff! But this is the proverbial "wall of worry" that a bull market loves to climb.
The other good sign is that try as they might, the bearish speculators have not been able to plumb to a new near-term low for NASDAQ since April 11th, over a month ago.
Personally, I think what we are really seeing is that the bearish speculators tried to force a "sell in May and go away" move in late April and early May, but clearly they ran out of steam. So, now it's really only a matter of how much of May has to be in the rearview mirror before they finally concede defeat. May is already half over, with the long Memorial Daya weekend coming up soon.
The latest source of minor anxiety is that recent economic data has been semi-decent, leading people to worry that the Fed may act sooner to start raising interest rates, which may put pressure on stocks, especially those that pay dividends. That's the narrative, but rest assured that the Fed is very unlikely to dramatically raise interest rates any time soon. Maybe a modest rise in a year or so, but that's well beyond the time horizon for short and even medium-term speculators.
-- Jack Krupansky

Tuesday, May 13, 2014

A day of disorientation for NASDAQ

After a big pop for NASDAQ on Monday, it would not be surprising to see some amount of profit-taking and "consolidation." Or, maybe a continuation of the rally. But the main outlook for the day is that market participants will be disoriented for a day or two or three until they can see how the real trend develops after that pop.
The biggest risk is that the short-term bearish speculators will bide their time for a few days and then all jump on in unison and slam the market with another 100-point decline as we have seen happen in the past. That's a real risk, but certainly not a certainty.
Even if we do see a 20-point pop, which is very possible, that won't be enough to cement the gains from Monday.
Whatever does happen with NASDAQ today will not be a reliable indicator of its near or medium-term trend.
Stay tuned.
-- Jack Krupansky

Monday, May 12, 2014

Nice NASDAQ rally, but will it last?

Yeah, that was a nice rally for NASDAQ on Monday, closing at 4,144, but the question of whether those gains will stick and lead to further gains is completely open.
A sharp rally like this on essentially no news is typically a "short-covering rally" – too many short-term bearish speculators had bet against stocks and a subset of their colleagues decided to reverse and pull the rug out from under the remaining bearish short-term speculators. Just a little buying leads to a little short-covering, which leads to rising prices, which leads to more short-covering, and quickly the snowball grows into a mountain.
NASDAQ has now reclaimed a little over a third of the loss from the recent peak of 4,372.
Now the question becomes whether NASDAQ will rally past the other intermediate peaks that it passed on the way down, namely the 4,148, 4,161, 4,276, 4,319, 4,333, and 4,358 levels. That's a lot of territory to cover, and all of it still constitutes a trading range, so we could easily see NASDAQ rise another 100 or even 200 points and then reverse again and remain in the trading range.
-- Jack Krupansky

NASDAQ rally - real or a dead-cat bounce?

NASDAQ futures are pointing to a sizeable pop at the open, but that doesn't tell us how NASDAQ will trend for the rest of the day or week or month or year. The immediate issue will be whether market participants "sell into the rally", indicating an underlying bearish sentiment. OTOH, short-term speculators who honestly realize that their efforts to push NASDAQ to a new short-term low have failed may decide that they will have greater profit opportunities by letting NASDAQ bounce higher, even if the rally is relatively short-lived. But, even such a rally could itself quickly run out of steam – after all, we are in "sell in May and go away" territory, and reverse – showing the rally to be a "dead-cat bounce" (as in "even a dead-cat can bounce") rather than a real, durable rally.
Even if the rally persists, the question will remain whether NASDAQ is really just trapped in a trading range. The only way to answer that question is to see either a new near-term low or to see NASDAQ rally strongly beyond the recent peak of 4,371.
As they say, stay tuned.
-- Jack Krupansky

Sunday, May 11, 2014

NASDAQ continues to be stuck in a trading range

As feared, the trading pattern this past weak still didn't resolve the short-term trend in terms of bullish or bearish. Sure, NASDAQ declined by 1.26% for the week, but it did not set a new near-term low. In fact, the good news is that the three lows of the week were all still above the low of the previous week – higher lows is a good sign, although higher highs would have made it an even better sign.
So, the good news/bad news is that the bad news is that NASDAQ was unable to push towards the upper edge of the trading range, while the good news is that the bears were unable to push NASDAQ closer to the lower edge of the trading range.
The other good news is that NASDAQ was once again successfully able to resist the efforts by short-term bearish speculators from coming close to a 10% decline from the recent NASDAQ peak. In other words, we still are not officially in a correction. You could call it a mini-correction (NASDAQ is 300 points or 6.9% off its recent short-term peak) or a trading range, take your pick. I think I'll go with continuing to call this a mini-correction since NASDAQ really hasn't shown any signs of heading towards to recent near-term peak of 4,371.
As far as outlook, lingering anxiety about weak Q1 results, Ukraine, and whether or not "sell in May and go away" will be a reality this year will continue to dog the market, but I continue to believe that the bears are slowly running out of steam.
All of this said, we are probably overdue for a relief rally, but even so, it won't be obvious whether a strong rally will be an indicator of a continuation of a new up-leg, or another of the dead-cat bounces that are common in any bearish market.
Personally, I'll continue to be on the lookout for big dips of the new-wave technology leaders, such as Tesla, LinkedIn, Twitter, Facebook, Yelp, Workday, Stratasys, Amazon, Under Armour, Priceline, Google, Netflix, SolrCity, etc. These guys have durable and enduring franchises, so dips are just opportunities to lower your average entry price.
-- Jack Krupansky

Monday, May 05, 2014

The battle over the NASDAQ trend continues

This week it appears that the bearish short-term speculators are shifting into another gear. Once again we start with an underlying economy that is showing reasonable strength and signs of it picking up steam, but... the bearish short-term speculators instead focus on short-term transitory factors such as anxiety over Ukraine, anxiety over China growth rates, the proverbial "sell in May and go away" trading pattern, and other random anxieties. So, trading starts with futures pointing to a moderate decline. The big question is how the rest of the market participants respond – do they jump on the bearish bandwagon, or do they buy the dip. One day doesn't mark a trend, so it may be Wednesday or Thursday before we have some clarity on the near-term trend for NASDAQ.
Short-term speculators always like to test any emerging trend, or to see if an apparent trend is merely half of the side to side movement in a trading range. Good for them. It adds to market volatility and commission profits for the brokers, and masks any actual trend in the short-term.
Meanwhile, it was a reasonably good sign that NASDAQ did not suffer a major selloff last Friday, and actually had a modest gain for the week.
I suspect that we will see more of the same this week, after we get past the opening positioning today to start the week.
-- Jack Krupansky