Thursday, December 18, 2014

NASDAQ poised to test whether the bounce is real

The outsize bounce of NASDAQ on Wednesday was awesome, but was it real and will it stick, or was it just a traditional short squeeze rally fueled by "forced" short-covering when "stops" were breached and the shorts will return with a vengeance soon enough, or was it due to more hedge funds switching from "risk off" to "risk on"? Today, the market will take a shot at testing the assertion that the short-term downwards trend was really just trading within a wide, loose range or just the start of a more massive selloff or outright correction.

NASDAQ futures are up very sharply, indicating a sharp pop at the open, but as always, it is an open question whether people will pile on with more buying after that pop or retain or switch back to a "risk off" bias and sell into that massive rally at the open.

Short-sellers who had been forced to cover yesterday will be anxiously awaiting a new, higher reentry price to "put their shorts on" again. They will get that opportunity today, for sure, but if the rally turns out to "have legs", then they will be quickly forced to "take their shorts off" yet again. Rinse and repeat.

I'll be looking at the possibility of selling some of my recent dip purchases at 5% gains.

Overall, I remain heavily bullish, with heavy bets on all of the technology companies with bright futures, with cash reserves to take advantage of short-term dips.

I am seriously wondering if Fed Chairperson Janet Yellen may have put the final nail in the coffin of the psychological bear market in oil through her repeated use of the magic word "transitory." Oil (OIL) has a two-day rally going, looking to extend that for a third day, but brief rallies occur all the time within bear markets. Furthermore, it could well be that we are in a longer-term bear market for oil in that we may not head over $100 again. The medium-term market will be where all the interesting action will be - $40 vs. $80.

-- Jack Krupansky


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