Monday, July 07, 2014

NASDAQ needs to consolidate a little

NASDAQ certainly zoomed up last week, but... it was a lazy, slow week, partly due to the summer, but especially due to the looming long holiday weekend. As a result, not everyone was in the market. Now, as people straggle back in from the long holiday weekend, expect some volatility as people decide how to adjust their "risk on" versus "risk off" bias in light of NASDAQ being at a post-March near-term peak. Sure, there is plenty of economic reason for stocks to continue to advance, but the problem is that we don't know how much of the recent advance is short-term speculative "hot money" which can run away just as quickly as it runs into the market.
 
NASDAQ futures are down moderately this morning, suggesting a weak open, but the question is whether people pile onto the decline or buy dips. And if there is a bounce from any dip, do people then pile onto thr rally or sell into any rally. We may just see lots of trendless volatility, but we could see either a sell-off in advance of the upcoming quarterly reporting season, or we could see additional rallying into the same. IOW, no clear short-term trend from here.
 
A little consolidation would make sense here, but markets rarely use sense as their short-term guide.
 
Still, my fundamental guide here is that the economic and business prospects for the U.S. economy are continuing to incrementally improve. The path will be bumpy, but continues to be upwards for the underlying fundamentals. Exactly how the stock market tracks that improvement will vary from day to day, week to week, and month to month.
 
-- Jack Krupansky

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