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