NASDAQ to take another stab at testing support

NASDAQ did fairly well on Wednesday, testing support at the psychological 4600 level and even managing to close 29 points above its opening level, even if still down moderately for the day. IOW, it could have been a lot worse but it wasn't. Today looks likely to be a more serious test of support at the lower edge of the trading range. Even if NASDAQ does manage to close below the January 6th trough, it has deeper support at the mid-December trough at the 4550 level. Also, it is now not uncommon for NASDAQ to break below support by more than a little and still manage to bounce back fairly sharply. IOW, hedge funds are not afraid to challenge and violate traditionally sacrosanct trading rules.

NASDAQ futures are down sharply, nominally due to Swiss forex issues, indicating a significant drop at the open, but once again it is a coin flip whether people will actually pile on for a further sell-off or whether they will buy the dip. I'll probably buy a little at the open and then later in the day if the sell-off does extend.

We could see a decent recovery bounce sometime today after the opening dip, or the hedge funds may decide to push lower to give themselves a lower entry price if indeed they do intend to get ready to flip over from "risk off" to a "risk on" bias to play another swing upwards in the wider trading range.

There is no guarantee that the hedge funds will continue playing the swings of the trading range as opposed to the sell-off being simply a precursor to a true 10% correction or even a full-blown bear market, but siply a reasonably high probability that the hedge funds are playing their same games.

Earnings season has started, but not yet with a lot of fanfare or enthusiasm. Playing the technical trading range swings seems more interesting to the hedge funds than economic or business fundamentals.

Oil (OIL) remains volatile. We had a nice recovery bounce, but that could likely be simple a dead-cat bounce as the two trading camps duke it out as oil seeks a bottom here in the $40 range.

-- Jack Krupansky