Tuesday, February 24, 2015

NASDAQ awaits divine guidance

Seriously, NASDAQ is sitting in an idling mode, trying to make up its mind whether to leap above the magical psychological 5000 level or to spin around and dive back downwards in its trading range, or to just flutter and consolidate some more while it awaits divine guidance. All three paths appear to be about equal probability. Maybe divine guidance will come in the form of positive or negative words from Fed Chair Yellen when she speaks before Congress today. Fed funds futures indicate that liftoff will not occur until September or October, but quite a few commentators and even some Fed officials insist that June is still on the table for the first fed funds rate hike. Yellen may resolve that dispute this morning... or not.

Absent the Fed, I would expect continued consolidation until enough of the hedge funds change their bias, either to add more risk and force more short covering that will push NASDAQ up into the sky, or to take more risk off the table and let the shorts depress the market back down in its trading range as they have done so many times over the past year.

I still expect  that NASDAQ will poke through that NASDAQ 5000 level within a few days, but that is only a more likely possibility rather than an absolute slam dunk.

Market breadth is lousy - for the 150 or so stocks that I follow, more were down than up yesterday, even though NASDAQ plodded upwards to a new 1-year high despite spending most of the day in negative territory. Volatility is king right now. It may also take a few weeks of sideways trade range activity before we get there, or at least to build a solid enough base at these levels so that a rally above 5000 is actually sustainable, unlike the rally in March of 2000. Sustainability is the key. You can't take a flash in the pan to the bank.

NASDAQ futures are down modestly, indicating a modest pullback at the open, suggesting more consolidation after the recent strong advance to yet another 1-year and 14-year high, but of course we have to caution that futures and the opening move are not a reliable indicator of how the market will trend for the rest of the day, especially on a critical news day, especially with the Fed Chair poised to speak. Historically, the market is very volatile on such days, and it can take a couple days for the dust to settle and the underlying trend to reassert itself.

I remain fully invested in my investment portfolio and a bit over-invested in my trading portfolio, but with reserves to take advantage of additional dips.

-- Jack Krupansky

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