Tuesday, July 15, 2014

NASDAQ poised to reclaim its near-term peak

NASDAQ had a nice pop on Monday, although I suspect it was more of a short squeeze than true long-term investors in search of buy and hold. The good news was that it was not a heavy short squeeze, so we don't have a large mob of short-term bearish speculators swarming to pound on the market. If anything, we probably have enough short-term bearish speculators already in the market to fund a bunch more of these mini short squeezes. Short squeezing aside, there did seem to be some enthusiasm on Monday for buying in advance of the coming deluge of Q2 quarterly reports. But, that can be good and bad news. It's great to have enthusiasm, but the "buy the rumor, sell the news" kind of enthusiasm we don't need, unless you are a short-term trader.
 
NASDAQ is just a hair more that 1% below its recent near-term peak. We could see a new peak within a couple of days... or not. We just don't know for sure how the overall market will react to each of the major quarterly reports, whether the good (and bad) news has already been priced in or not, and how much "buy the rumor, sell the news" (or "sell the rumor, buy the news") sentiment is really out there.
 
NASDAQ futures are up moderately again today, suggesting at least a pop at the open, but once again we need to watch and see whether people sell into the rally or pile on, and whether there is any convincing enthusiasm for buying on any dips. Most likely, we will continue to see volatility.
 
Intel (INTC) is reporting after the close, so it will be interesting to see whether people take profits before the close or pile in before the close, and then how people react to the report. I actually sold all of my INTC stock yesterday since I had a significant profit since last fall, but also picked up some cheap call options that expire on Friday just in case there was a pop after the report today. Originally I bought the stock primarily for its dividend yield (3.9%), but with the rally over the past nine months, the yield is less appealing compared to other possibilities, such as the Banco Santander (SAN) that I picked up on the dip last Thursday with the Portugal scare. Depending on how this week plays out for Intel, I may even exercise the call options or buy on any dip. So, I'm covered either way and my profits are protected.
 
I also sold a small chunk of my Facebook (FB) stock that had huge profits over the past two years. I was way overweight on FB and kind of light on cash reserves. I also have some call options, so I'm amply exposed for any additional gains.
 
I'm pondering whether to play my Apple (AAPL) stock the same way. And Microsoft as well.
 
-- Jack Krupansky

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