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

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