Thursday, July 10, 2014

NASDAQ ready to be tested

The nice recovery bounce on Wednesday was fine, but not conclusive. It may indeed have simply been a dead-cat bounce... or not. It looks like we are about to find out. NASDAQ futures are down very sharply, indicating a significant gap down at the open. Although, honestly, this is much more of a trading setup rather than a move based on economic and business fundamentals. Traders love to make up excuses for their "moves" – in this case purported anxieties about the Fed and Portugal, or something vague like that. I did some reading and neither seems that significant for most U.S. stocks. It honestly doesn't matter. Let them have their gap down at the open. That's a good if not great "test" for NASDAQ. Sure, there may be some piling on for the initial decline, but it remains to be seen how many people will really fall for this gambit vs. buying the dip.
 
With slow summer trading, anything is possible. The initial gap down could turn into a 50, 80, or even 100 point decline, stay flat through the rest of the day, or rise steadily for the rest of the day for only a moderate decline for the day. Anything is possible.
 
As I said, this will be a "test" for NASDAQ, to verify whether the recent advance has "staying power" or was just a temporary thing. In some camps of traders, they feel a moral obligation to engineer these kinds of moves or tests to try to push back down to verify that "support" holds. Fine, let them have their test.
 
Now... to make a short list of stocks to buy on the dip!
 
-- Jack Krupansky

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