Friday, August 01, 2014

NASDAQ poised to test lower edge of its trading range

Wow, that was impressive – as I suggested early yesterday, the failure of NASDAQ to achieve a breakout on Wednesday left traders more inclined for consolidation within the trading range, and we got that, in spades. We even came close to testing the lower edge of the trading range as well (the March peak), but not quite. Today, traders may use the disappointment of yesterday's decline to take a shot at that lower edge again, but... since they failed yesterday when pessimism was at a climax, their odds of success are greatly diminished.
Again, it may also have been a combination of slow summer trading, people wanting to cut out early on Friday and dumping positions on Thursday, or even option expiration today.
I wouldn't read too much, if anything, into the steep decline on Thursday, other than that yes these kinds of dips can occur even in the most bullish of markets. And we're in a trading range here, so the rules of a trading range trump any underlying longer-term bullishness.
We may or may not see a dip at the open to "test" the lower edge of the trading range. If we do see a dip, the big question is whether people buy the dip and we reverse and start trading upwards within the trading range again. Or, if people pile on to the dip, we could see a true "breakdown" and head into another mini-correction. Given that this is a slow Friday in a slow summer, I wouldn't draw any immediate conclusion even if we do close modestly below the March peak. The action on Monday and Tuesday will be more telling, when people get back from their summer weekend.
As far as GDP, average the Q1 and Q2 reports to get a better view of where we are, so averaging 4.0 and minus 2.1, gives us about 1%. I expect that Q3 will probably be about 2% or so. Yes, the economy is still plodding along, neither booming nor busting. We are still in the recovery phase after the recession, and will be for at least another year if not two. So, there is no need to worry that the Fed is going to dramatically raise rates over the coming year.
I bought a little more LinkedIn (LNKD) and Tesla (TSLA) just before the close. It will be interesting to see how they play out. My goal for those two positions is simply a 5% pop. I have longer-term positions in both that I will stick with no matter what.
I also picked up an extra position of Amazon (AMZN). Wall Street has a hot/cold attitude toward them, but I have great confidence in their longer-term business prospects.
And I picked up an extra position of Yelp (YELP) as well in its post-report dip. And 3D Systems (DDD) as well. I really like these dips.
-- Jack Krupansky


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