Monday, May 12, 2014

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

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