Thursday, November 06, 2014

NASDAQ set to try a little more consolidation

Wow, that was they shortest honeymoon ever, with NASDAQ popping 22 points at the open and then heading straight down and into the red in a mere 20 minutes. This tells me that the overall speculator sentiment is quite bearish, at least in terms of desperately wanting to see NASDAQ do some serious consolidation after the big advance next week. And then the big question is whether we will be poised for a new leg up or merely to trade back down in a broader trading range.
 
NASDAQ is still safely above the 4600 level and remained so even at its lowest point yesterday. That's a good sign, although a weak one.
 
NASDAQ futures are down modestly, suggesting a modest dip at the open and that traders are merely hesitant but not committed to a specific trend. The question is how speculators set their bias after that opening dip – either "risk off" and they pile on to the dip for a real selloff, or "risk on" and they buy the dip. Both are possible but sentiment seems biased towards the former. Beware, because sentiment is frequently a lousy leading indicator, not always wrong, buy simply frequently not always right – only a modest correlation with the actual emerging trend.
 
We could just see a fair amount of volatility and narrow range trading until we get enough time behind us for memories about the Fed and election anxiety to have faded enough for people to focus on the economy and business outlook going forward over the next six to nine months. Even if the Fed does start raising rates in June, rates will still be too low to have more than a very modest negative impact on the economy for more than a year out, well beyond the "planning horizon" for short and medium-term trends in the market.
 
-- Jack Krupansky

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