Wednesday, October 01, 2014

NASDAQ testing lower edge of its trading range

NASDAQ is still struggling to find a new trend, stuck in a fairly narrow trading range. It bounced against the lower edge of its trading range a bunch of times over the past two days, but has shown no real conviction to either break down below the trading range, or to bound higher away from that bottom edge. Traders will valiantly try to test that edge again today.
 
NASDAQ futures are moderately down this morning, indicating a dip at the open, but as we have seen for the past two days the market participants who are active after the open can frequently have a completely different idea of where they think the market is headed. So, the big question for today is whether a dip at the open leads to people piling on for a selloff that leads NASDAQ down below the recent trading range, or... people buy the dip and we either continue to hover near this lower edge of the trading range or maybe finally bounce and head back towards the upper edge of the trading range.
 
I would note that sometimes the edge of a trading range can be rather soft than hard and the market can actually move a bit beyond the hard edge but still manage to recover within a few days, so breaching the edge is not necessarily a definitive trigger leading to a true trend change. The main point for the recent market is a complete lack of conviction in either direction.
 
I did pick up a little EBAY yesterday. It looks poised for a dip as shorts return after the pop yesterday. I'll buy more after a 5% dip.
 
I also picked up some Cypress Semiconductor (CY) as a speculative play. It has a 4.46% dividend yield, although earnings are weak, so there is not a "safe cover" on that dividend.
 
And I also picked up some more Banco Santander (SAN). The dividend yield is 8.66% and does have a safe cover.
 
I have both of those stocks in my "synthetic savings account", which keeps a sizeable chunk of my free cash in the brokerage money market fund, but has a fraction of the money in a handful of stocks, so that the stock dividends more than offset the very meager return on the money market fund. There is plenty of raw cash immediately available in the account without selling an investment assets to meet any "rainy day" cash needs, but overall the money earns a decent return.
 
-- Jack Krupansky

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