Monday, December 22, 2014

NASDAQ poised for a pre-holiday bounce

NASDAQ certainly had a nice sharp V-shaped mini correction and recovery last week, but that doesn't tell us anything about the shape of the trend for the future. We are now embarking on the biggest holiday week of the year, in fact two of them back to back. A lot of the biggest and boldest market participants will be mostly AWOL for the next two weeks, enjoying the fruits of their labors. The remaining market participants will compete with in other to jerk the market around in all directions but with low volume, so we will likely see plenty of volatility until we get well into the first full week of January of the new year. IOW, whatever apparent trend that emerges in the coming days won't necessarily become real until after the full roster of market participants has an opportunity to vet and revise it in that first week of January.

There is a slightly higher probability that the market will rise over the next two weeks. Call it a Santa Claus rally or window dressing. It's a seasonal effect and has next to nothing to do with the longer-term trend for the market.

NASDAQ futures are up modestly, indicating a modest pop at the open. Low trading volume will give the opening move a somewhat higher probability of sticking through the close, subject to any news that might upset the apple cart.

Oil (OIL)  is still struggling to find its new short-term trend and is now locked into a wide, loose trading range, with $50 and $60 both equally likely and equally just out of reach. It may sit here jumping around wildly in that range for the rest of the holiday season, subject of course to any news, until the first full week of full-volume trading in January.

I'll be looking to raise more cash reserves as stocks continue to recover from the recent mini correction.

My main focus is on reviewing and revamping my overall asset allocation for the coming year. Whatever 2014 was, 2015 will be its own year with its own trend and its own winners and losers. We can always learn from the past, but presuming that the future will be a carbon copy of the past is always risky business.

-- Jack Krupansky

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