Thursday, October 16, 2014

NASDAQ again poised to search for a bottom

NASDAQ is certainly taking a wild ride here. Sure, chatter about economic weakness is all the rage now, and is a real issue in Europe, but the U.S. is doing fine and continuing to incrementally improve (more workers getting hired every day.) Don't get confused by monthly volatility in economic reports. It is the longer-term, smoothed trend that matters. As economists like to say, the latest data point in a series does not establish a trend.
 
NASDAQ did break below it's previous broad trading range, but looks to be forming a base for an even broader trading range.
 
Traders obsess over things like round numbers for their psychological impact, like 10% as being some magical threshold for a "correction." Fundamentals have no such concept.
 
NASDAQ did dip a bit below that 10% "correction" level for a bit yesterday, but recovered sharply into the close. That doesn't mean we are out of the woods yet. Traders will try a couple more times to break below that magical psychological barrier. And, to repeat, none of this has to do with business fundamentals or the incremental strengthening of the U.S. economy.
 
I'll almost certainly buy more Netflix (NFLX) on its 25% opening dip. This type of irrationality by Wall Street traders is a major boon to us investors more focused on the longer term for enduring brands.
 
Yesterday I picked up more Akamai (AKAM), Banco Santander (SAN), Cypress Semiconductor (CY), Solar City (SCTY), Under Armour (UA), and WorkDay (WDAY) on the dip.
 
I'll consider picking up more stocks on any additional major dip, after I load up on NetFlix.
 
-- Jack Krupansky

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