Thursday, October 30, 2014

NASDAQ seeks adustment after Fed meeting run-up

Okay, great, we finally got the infamous Fed meeting that ended QE buying out of the way. No more discussion needed on that front! So, now NASDAQ needs to find its feet and return to some more natural trend based on actual economic and business fundamentals rather than the positioning and posturing ahead of the Fed meeting. But as I have said, it will still take a couple of days or even a week for the dust to settle.
 
NASDAQ futures are down moderately this morning, for no great, particular reason, probably just traders wanting to test whether recent gains are indeed durable. So, we will have a moderate dip at the open. But then what? Exactly! We'll see if there really are plenty of people lined up to sell stocks they could have sold yesterday. Or, people who are willing to buy the dip. Ultimately it is a question of exactly how the hedge funds decide to set their bias for the short run here, whether it be "risk on" buying or "risk off" selling. Or more precisely, how many of these hedge funds seek to change or enhance their bias on a daily basis.
 
A moderate bit of consolidation here would be no surprise at all. Or, renewed hedge fund buying as well. It's not possible to judge the degree to which hedge fund "appetites" for either taking on risk or laying off risk are sated and diminishing or growing. The real net effect is that we will continue to have range trading moderated by longer-term money flows from non-hedge investment managers and retail investors, the latter being hard to discern though all the noise of range trading.
 
Now that the Fed meeting is history, the next question is when the Fed will start raising rates. The earliest estimate is March, the latest is September, with June as the best guess for the most likely "liftoff" point. All of that is still too far off in the future to have any significant short-term impact on stocks – other than what is already priced into stocks.
 
The real bottom line here is that the economy continues to incrementally improve – which is why QE buying is no longer needed, duh – which should provide longer-term support for an incrementally rising stock market, although the longer-term trend is rather hard to see when you layer all the hedge-fund range trading on top of it.
 
I'll consider some more dip buying on any additional 5% dips of any of my stocks.
 
-- Jack Krupansky

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