Tuesday, October 21, 2014

NASDAQ poised to test its new legs

Monday was a mixed but still semi-decent day for NASDAQ. On the negative side, my concern is that a large chunk of the gain was likely simply short covering, a classic short squeeze, but on the positive side I strongly suspect that a healthy chunk of the buying was by hedge funds that at least tentatively have switched from a "risk off" bias to a "risk on" posture and really do intend to run NASDAQ back up towards the upper edge of its broader trading range. IOW, the desire for a 10% "correction" has run its course, so the path of least resistance is to retrace the path in the broader trading range. That said, we could also be in a narrower trading range and the nice pop may fizzle  and reverse within a few days. Still, this does have more of the feel of last May when the emergent "correction" fizzled out and NASDAQ leapt towards the sky, again.
NASDAQ futures are up moderately strongly this morning, maybe on relief that Apple (AAPL) had decent quarterly results yesterday afternoon, suggesting a nice pop at the open. The big question is whether enthusiasm builds after that opening pop, or fizzles quickly and we see intensive selling into rallies. That latter could happen, but it just feels like the former is more likely. Still, it could take a few more days before the specter of a 10% correction is behind us.
My dip buying is now likely behind me as I focus on whether to sell some of these dip positions at 5% or 10% or 15% gains or keep them until NASDAQ gets closer to the upper edge of its broader trading range.
-- Jack Krupansky


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