Wednesday, December 10, 2014

NASDAQ still confused about short-term trend

NASDAQ had a nice bounce on Tuesday, recovering more than half of the losses from Monday and bouncing sharply from a steep sell-off at the open, an intra-day swing of 82 points. Rather impressive. But... the moderate rise for the day may simply have been an overreaction to the overreaction of of the negative sentiment at the open. All of this points to a market that is still mightily confused about its short-term trend. It also has a name: volatility. And it all amounts to a traditional trading range. NASDAQ stayed above its closing level of November 12th, and is now sitting a fair bit above the middle of its range since then.
 
A correction? Well, sure, a correction is always possible, but the current activity is more of a "consolidation" in a trading range combined with short-term anxiety of traders caused by a perceived slowdown in China and uncertainty over where the price of oil is headed next. Traders can indeed give us lots of volatility, but ultimately they can't take us out of a trading range – it's up to the hedge funds and other short and medium-term speculators to do that.
 
NASDAQ futures are down modestly, indicating a modest dip at the open and that traders probably feel that the pop at the end of Tuesday may have been more due to short covering than enthusiasm for opening long positions. But where the rest of the market participants will take NASDAQ after that opening dip is unknown – and frequently not correlated well at all with pre-open futures.
 
Tonight is IPO pricing for Lending Club (LC) and Momo (MOMO). Whether I am allocated shares of the IPO though Fidelity or not, I will be owning those stocks shortly after they open for trading tomorrow morning.
 
And tomorrow evening will be pricing for HortonWorks (HDP), Workiva (WK), and New Relic (NEWR). I have indications for the first two, but Fidelity isn't participating in the IPO of the latter. Again, either way, I'll be an owner on Friday morning.
 
My IPO positions will be fairly modest and long-term holds, but I also have the expectation that I will be increasing those positions on any significant dips over the next year or so.
 
-- Jack Krupansky

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