Friday, January 16, 2015

NASDAQ poised for a moment of truth

We may have seen a bit of capitulation and throw in the towel sentiment in NASDAQ yesterday as it traded down with little recovery in the final half hour of trading. Today could well be a classic moment of truth where either the tide turns and NASDAQ turns and trades back up in its wide trading range, or the bulls capitulate and the sell-off deepens and heads towards a full-blown correction. Futures are down sharply, but a little higher than last night, suggesting that at least some fraction of market participants are willing to consider that the opening dip could be the low for the day or that we will see some sort of recovery bounce during the day. Whether that actually happens is indeed a coin flip.

I do expect that we will see a big dip at the open to technically break below the level of the December trough, but whether that kicks off a further sell-off or simply triggers a massive wave of dip-buying and a classic short-squeeze short-covering rally is a coin flip. I do expect that somewhere in here, at least within the next few days that we will see the hedge funds flip the switch and reverse their trading bias from "risk off" to "risk on".

To be clear, I am not saying that today will absolutely be the day that NASDAQ turns around, but simply there is a very significant probability of such an event.

The economy may indeed be taking a little breather in here, but that's actually typical, with GDP showing a lot of quarter to quarter volatility. But so far there are no solid indications that the U.S. economy is doing anything other than continuing to incrementally recover, albeit at too modest and uneven a pace to satisfy your average ADHD-afflicted Wall Street trader or speculator.

I did buy a little Intel (INTC) after the close after their post-earnings dip. It was my first after-hours trade, ever. I was trading using Fidelity. I also bought a little Bank of America (BAC) that seems oversold.

Oil (OIL) remains unsettled and still seeking its bottom, but is showing some positive signs, although they could indeed be more of the dead-cat variety. I will buy again on the next 5% dip, if that does happen.

I may do a little dip buying at the open, or even in the pre-market just before the open, and certainly more later in the day if a new low is hit.

I have revised my forecast for the outlook for the Fed target interest rate, from a liftoff in September to October and a final rate in December of 0.50% rather than 0.75%. IOW, the Fed will not be an issue for people who had been worrying about rising rates this year.

-- Jack Krupansky


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