Tuesday, July 29, 2014

NASDAAQ poised for a modest recovery bounce, but still stuck in a trading range

The bad news is that NASDAQ was down again yesterday, but the good news is how well it recovered from a fairly steep decline earlier in the day. That suggests that we're not in anything close to a "bear market". Rather, this is simply the trendless volatility of a trading range.
 
NASDAQ futures are up modestly, suggesting a recovery bounce at the open. The question is whether people pile on to that bounce to kick off a moderate short squeeze, or sell into the rally to push further down in the trading range. And whether people buy any dips and how aggressively they sell into any further bounces
 
There is no real fundamental reason for the markets to exert a strong trend here, so mostly we will be looking at the natural volatility of a traditional slow summer trading season.
 
We do have the Q2 GDP report coming up tomorrow and monthly employment report on Friday, so we could see some buying or selling "on the rumor" going into those reports and then the reverse once each of those reports are out.
 
At this stage, I would expect that traders would be more likely to try to test the lower edge of the trading range than to take another shot at the upper edge, but all too frequently the actual market move is against the consensus since smarter, deeper pockets wait to see how dumb money bets and then bets bigger in the opposite direction. In other words, being nimble works better.
 
-- Jack Krupansky

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